Helios Towers Plc Annual Report 2018

Plain-text annual report

Annual Report 2018 H e l i o s T o w e r s | A n n u a l R e p o r t 2 0 1 8 Driving the growth of mobile in Africa Contents Strategy in action New markets: Helios Towers enters South Africa Organic growth: Built 1,800km communications backbone in DRC Operational excellence: The digitalisation dividend pg.22 pg.24 pg.26 Overview 01 Who we are 02 Highlights 04 Investment case 06 At a glance 08 What we do Strategic Report 10 Chief Executive Officer’s statement 12 Chief Executive Officer’s Q&A 14 Chief Financial Officer’s statement 16 Business model 18 Market overview 22 Strategy in action 28 Sustainability 34 Operating review 36 Detailed financial review 41 Risk management 42 Risks related to the Group and our business Governance Report 44 Board of Directors 48 Executive team 50 Board committees 52 Glossary 54 Directors’ report 55 Directors’ responsibilities statement Financial Statements 56 Independent auditor’s report 58 Consolidated Statement of profit or loss 59 Consolidated Statement of other comprehensive income 60 Company Statement of profit or loss and other comprehensive income Consolidated Statement of financial position 62 Company Statement of 61 financial position 63 Consolidated Statement of changes in equity 64 Company Statement of changes in equity 65 Consolidated Statement of cash flows 66 Company Statement of cash flows 67 Notes to the Financial Statements 94 Appendix 1 95 Officers and professional advisors Interactive online version available at www.heliostowers.com Who we are Creating a platform for sustainable growth Helios Towers (“HT”) is a leading independent telecoms tower company in Africa. With a network of 6,745 towers we are market leaders in Tanzania, Democratic Republic of Congo (“DRC”) and Congo Brazzaville, with further operations in Ghana. We also recently announced market entry into South Africa. We build, acquire, own and operate telecoms infrastructure, hosting multiple mobile network operators (“MNOs”) on shared tower assets. Our sharing model, and dedicated focus on infrastructure, enables mobile services to be delivered at a lower cost and higher quality of service than the traditional single owner-occupier model. Africa’s under-penetrated markets are some of the fastest growing in the world. They are driven by young and urbanising populations, high GDP growth, and minimal fixed line availability. In our markets, mobile subscriptions are forecast to grow by 48 million, or 6% annually, to 2023.(1) As an established market leader, with exceptional service focus and expansion experience, Helios Towers is well positioned to play a pivotal role in the growth of African mobile telecommunication in the years ahead. (1) GSMA intelligence, Hardiman Report 2018; HT markets excl. South Africa. Helios Towers | Annual Report 2018 01 Financial StatementsGovernance ReportStrategic ReportOverviewWe are pleased to have delivered another strong set of financial results in 2018, including 3% revenue growth and 22% Adjusted EBITDA growth. In addition, sites increased 3% to 6,745 and colocations increased 5% to 6,804, resulting in an improved tenancy ratio of 2.01x. The Group is well positioned for continued growth, with market- leading positions in some of the most attractive and fastest-growing telecom markets in Africa. Kash Pandya | Chief Executive Officer Highlights Financial highlights Revenue (US$m) 2018 2017 356.0 345.0 +3% Adjusted EBITDA(1) (US$m) 2018 2017 177.6 146.0 +22% Adjusted EBITDA margin(1) (%) 2018 2017 +8 percentage points 50% 42% Operating profit/(loss) (US$m) 2018 2017 3.3 (24.0) +$27m Operational highlights Total sites(1) 2018 2017 Total colocations(1) 2018 2017 Tenancy ratio(1) 2018 2017 6,745 6,519 +3% 6,804 6,468 +5% 2.01x 1.99x +0.02x (1) Please refer to pages 52–53 02 Helios Towers | Annual Report 2018 OverviewHelios Towers | Annual Report 2018 03 Helios Towers | Annual Report 2018 03 Financial StatementsGovernance ReportStrategic ReportOverviewInvestment case 11 Market- leading positions • Market-leading positions in three out of five African markets. • Early market entry allowing for ownership of attractive sites in prime urban areas. • Skills in reliable power management and tower planning/deployment. 2 Africa’s favourable macro environment • Our five markets are projected to grow by 37 million people, to 266 million by 2023. That’s a 3% annual increase, compared to 0% annual growth across the G7. • Increasingly urbanised with 26 million people expected to move into cities in our markets by 2023, earning more and consuming more mobile services. • In our markets, approximately two-thirds of the population is under 30. This is the demographic that consumes the most data, and creates further opportunity for our customers. Population(1) (millions) Strong GDP growth(2) (%) +3% CAGR 1,195 1,023 +0% CAGR 779 761 +3% CAGR 266 229 HT Markets Sub-Saharan Africa G7 Population 2023E % 1 . 5 % 3 3 . % 6 . 1 G7 HT Markets (revenue weighted) Sub-Saharan Africa (1) Source: United Nations 2018; 2017–2023 (2) Source: IMF 2018; 2017–2023 3 High mobile telecoms infrastructure growth • Mobile penetration in our markets is significantly lower than western economies. • In our markets, mobile subscriptions are forecast to grow by 48 million, or 6% annually, to 2023.(4) • Fixed-line availability is extremely low in most of our markets. Mobile penetration(3) (%) Mobile subscription growth(4) % 5 8 % 8 % 6 % 1 4 % 5 4 % 4 % 3 HT Markets Sub-Saharan Africa G7 Tanzania DRC Ghana Congo B (3) Source: GSMA 2018; HT markets excl. South Africa (4) Source: GSMA, Hardiman Report 2018: 2017–2023; HT markets excl. South Africa 04 Helios Towers | Annual Report 2018 Overview4 Well positioned for long-term growth Existing markets • Significant adjusted EBITDA growth since 2015 expected to continue through c.12,200 new PoS required by 2023. New markets • Market opportunity, strong balance sheet, management team and customer relationships to support market expansion. New technologies • Opportunity to add adjacent new technologies to increase value to our customers. EBITDA and EBITDA growth (US$m) What we look for: – Emerging market 2 3 8 7 1 – Population of >10m 1 4 6 4 1 – 3+ operators Data centres 1 5 5 0 1 4 5 – Stable and/or pegged currencies Fibre backhaul – Infrastructure gap – High subscriber growth – Low mobile penetration Small cells 2015 Growth 2016 Growth 2017 Growth 2018 – Enhanced Group returns 5 Embedding business excellence • Continuously improving operational leverage and performance. • Unrivalled customer service. • Supply chain optimisation driving efficiencies across the business. • Realised capex savings through a reduction in strategic suppliers. Localised workforce Lean Six Sigma training 96% in operating companies are local employees 35% of employees trained by 2018 Weekly improvement in power service delivery 56% compared to 2017 6 Robust business model • Contracted protection against power and price inflation. • Stable and visible cash flows with diversified customer base. • Strong balance sheet to support investments. • Funding/financing options provide flexibility to support long-term growth initiatives. Contracted revenues $3.1B % EBITDA in USD/EUR pegged 65% Helios Towers | Annual Report 2018 05 Financial StatementsGovernance ReportStrategic ReportOverviewAt a glance We are a leading independent telecoms tower company in Africa, and are market leaders in Tanzania, DRC and Congo Brazzaville, with further operations in Ghana. We also recently announced market entry into South Africa. Sites 6,745 Tenancies 13,549 Tenancy ratio 2.01x Our history Growth in sites Our assets 2018 Tenancy ratio Sites Tenants Tanzania 2.12x 3,701 7,848 DRC 1.97x 1,773 3,492 Ghana 1.89x 891 1,680 Congo B 1.39x 380 529 South Africa From January 2019 Ghana Congo B Tanzania DRC South Africa 6,477 6,519 6,745 5,424 4,656 8 acquisitions in 9 years 2,517 2,710 2,974 831 >4,900 acquired towers 2010 2011 2012 2013 2014 2015 2016 2017 2018 >1,800 BTS towers 06 Helios Towers | Annual Report 2018 OverviewOur customers Our core business is to provide mobile network operators (“MNOs”) with tower site space, power and related services for their active network equipment. As our markets have little or no fixed line voice or data infrastructure, the services we provide are essential for the development of communities. We promote the sharing of infrastructure through colocating multiple MNOs on each tower site. This consolidation of assets not only delivers maximum cost benefits to our customers but also reduces the environmental impact for the local populations we serve. In addition, we construct new assets including “build-to-suit” (“BTS”) towers, and localised small cell and in-building solutions. These are located in high-potential areas where our customers are looking to expand, due to the continued growth of mobile voice and data communications across our markets. Contracted revenues $3.1B 8.1 years Average remaining contract life Contracted revenue by customers 2% 81% 17% Africa's Big 5 MNOs Africa's high-growth challengers Other operators Africa’s Big 5 MNOs $2.5B • Airtel • Vodacom • Tigo • Orange • MTN Africa’s high-growth challengers $0.5B • Viettel • Africell Other operators $0.1B • Smile • Simbanet • Orioncom • TTCL • Zantel • and 24 others Helios Towers | Annual Report 2018 07 Financial StatementsGovernance ReportStrategic ReportOverview At a glance Continued What we do Our principal business lies in building, acquiring and operating telecommunications towers that are capable of accommodating and powering the needs of multiple tenants. These tenants are typically large MNOs and other telecommunications providers who in turn provide wireless voice and data services, primarily to end-consumers and businesses. We also offer comprehensive tower- related operational services, including site selection, site preparation, maintenance, security and power management. We provide space on our tower sites under a combination of master lease agreements (“MLAs”), which provide the commercial terms that govern the provision of tower space, and individual site agreements (“ISAs”), which act as an appendix to the relevant MLA and include site-specific information. We also enter into ground lease agreements with property owners to host our sites on their land. Acquiring and building towers Diagram 1 (top, next page) highlights how we have accumulated our assets through a mix of acquisitions and organic build-to-suit sites. We construct BTS sites only upon receipt of an anchor order from an MNO. Our tower site portfolio consists mainly of four-legged, heavy duty ground- based towers, typically ranging in height from 35 to 70 metres. Subject to environmental permits and impact assessments, we may also be able to build taller towers when circumstances require. These include towers in valley locations, or those that are required to deliver a greater range of transmission, such as our new communications backbone in DRC. Anchor tenant In diagram 2 (centre, next page), the equipment on the tower and the outdoor cabinet are owned and maintained by the anchor tenant, which is the initial customer to occupy each tower. HT owns and maintains the passive infrastructure. This includes the tower’s diesel generator, battery backup system, site monitoring system and, if applicable, hybrid and solar technology. Standard colocation tenants In diagram 3 (centre, next page), a new “colocation” tenant shares the passive infrastructure (which we provide) with the anchor tenant. Colocations sit at the heart of our business model as they allow us to grow revenue and improve operating margins without significant additional capital expenditure. Amendment colocation tenants Diagram 4 (bottom, next page) demonstrates an amendment colocation tenant. This is an existing customer (anchor tenant or standard colocation tenant) adding or modifying equipment, taking up additional vertical space, wind load capacity and/ or power consumption, which leads to additional revenue billing under the menu pricing of an existing MLA. The Group calculates amendment colocations using the additional revenue generated by the amendment on a weighted basis as compared to the market average rate for a standard tenancy in the month the amendment is added. 08 Helios Towers | Annual Report 2018 Overview1 Acquire and build towers 2 Initial customer: anchor tenant 3 Additional customers: standard colocation tenant 4 Additional equipment: amendment colocation tenant Grow tower portfolio through acquisitions or organically through build-to-suit sites MNO places their active equipment on the HT tower and is the initial customer to occupy the tower Additional tenant adds their active equipment on the HT tower and shares the tower space with the anchor tenant Existing customer on a site (anchor tenant or standard colocation tenant) modifies or adds additional equipment on the tower Helios Towers | Annual Report 2018 09 Financial StatementsGovernance ReportStrategic ReportOverviewChief Executive Officer’s statement Our growth story continues 2018 has been a year of solid organic growth. It has also been a year of even better operational performance and setting a higher bar than in previous years. We are particularly pleased to have delivered our 16th consecutive quarter of Adjusted EBITDA growth, achieved through top-line growth and continued focus on operational efficiencies. We were also delighted to open 2019 on a high, with our announcement that we have entered into the South African market. The partnership with Vulatel and the acquisition of SA Towers represents a perfect fit of collective experience and expertise. Together we will address the infrastructure gap in South Africa and deliver lower cost, higher quality services to MNOs. The Group is well positioned, with market-leading positions in some of the most attractive and fastest-growing telecom markets in Africa. Kash Pandya | Chief Executive Officer Revenue +3% 2018: US$356m 2017: US$345m Adjusted EBITDA +22% 2018: US$178m 2017: US$146m 10 Helios Towers | Annual Report 2018 Performance overview 2018 Helios Towers traded strongly in the year, delivering revenue growth of 3% to US$356 million, Adjusted EBITDA growth of 22% to US$178 million, and an operating profit of US$3 million, increasing US$27 million from an operating loss of US$24 million in 2017. The Group has delivered strong organic growth through new tenancies and expanded margins through operating leverage and continued execution of our business excellence strategy. Life-changing mobile communications The Group is well positioned, being a market-leader in some of the most attractive and fastest-growing telecom markets in Africa. In our markets there are many favourable macroeconomic trends. The population across all our markets is expected to expand by 37 million to 266 million by 2023. This population is urbanising and over two-thirds are under the age of 30 – the rapidly growing tech-savvy young population who are driving the demand to be connected to each other, social media and streaming services. This is combined with strong GDP growth forecast in our markets, which the IMF expects to be 5.1% annually to 2023 (compared to 1.6% across the G7). Against this strong macroeconomic background, the telecommunications sector is experiencing significant growth. In fact, the growth in our markets is reminiscent of western market growth in the early 2000s, but with two essential differences: there is negligible competing fixed line availability, and millions are experiencing mobile for the first time at a superior smartphone-level. Strategic ReportHT Markets GDP growth 2017–2023E(1) +5.1% SSA: 3.3% G7: 1.6% Mobile subscribers 2017–2023E(2) +48m In HT markets (excl. South Africa) (1) IMF estimates, weighted average by HT revenue (2) GSMA intelligence, Hardiman report 2018 They are leapfrogging the upgrade path others have taken in the last two or three decades, and their daily lives are being transformed – not just by voice communication, but by online banking, online health consultations, education, access to live crop prices, tourism marketing and much more. We are well established and well positioned to work with our customers to provide the expertise and infrastructure needed to support their expansion plans to meet this demand. DRC’s new communications backbone A significant project for the Group during 2018 was a major investment in upgrading and constructing a microwave backbone network covering 1,800km in DRC. Constructed across challenging jungle conditions in some of the most remote areas of DRC, this network replaces old satellite technology and provides improved infrastructure and connectivity to an estimated six million citizens in the country. DRC has one of the lowest mobile penetration rates in the world, with under 37% of its 84 million population having a mobile subscription. However, having experienced 15% mobile subscriber growth from 2011 to 2018, it is growing quickly. Our investment supports the continued improvement and expansion of the network by local MNOs and follows the recent award of inaugural 4G licences to MNOs in DRC including Vodacom, Orange and Africell. Together, we are helping to connect and create economic prosperity for DRC’s growing and young population. Pages 24–25 provide further information on our new communications backbone I’d like to congratulate our technical and construction teams. They overcame numerous challenges, including physical access to the build sites, sourcing labour and materials, and scheduling in the face of heavy rains, to deliver a network that will have a significant impact on the local population. Governance We entered the year intending to launch an IPO, and in order to augment our team we welcomed Allan Cook as Chairman and a Director of the Company. After Helios Towers decided not to proceed with a listing in March 2018, Allan stepped down. Additionally, Carlos Reyes joined our Board as a representative of ALAC, following the resignation of Colin Curvey, and Umberto Pisoni was appointed as a Director, representing IFC. Subsequent to year-end 2018, Waldemar Szlezak, who served on our Board as a representative of Soros Quantum Strategic Partners Ltd, resigned to pursue other opportunities and has been replaced by Joshua Ho-Walker. Risk We continue to focus on risk management through enhanced compliance monitoring and reporting on high risk areas; these include anti- bribery and corruption, third party management and conflicts of interest. We are also focused on technology risks and have engaged specialist IT consultants to address risks such as cybercrime, network access, and data privacy and security. Externally led training has also benefited key members of our project and operations teams in areas such as cost management, materials and customer contract requirements. Looking forward: 2019 and beyond Our aim as we enter 2019 is clear: continue our profitable growth story. We will continue to mine the considerable opportunities in our existing markets and focus on continued growth through additional colocation volumes, amendment revenues and build-to-suit tenancies as well as margin expansion driven by additional operational efficiencies. At the same time, a focus for us in 2019 is to find new fertile markets in Africa where we can also bring our proven model and skills. As such, we are excited by the recent announcement of our entry into South Africa, through the partnership with Vulatel and the acquisition of SA Towers. We have long considered South Africa an attractive opportunity, due to its economic growth, population demographics and demand for advanced telecommunications services. By joining forces and sharing expertise, we will look to build our wireless and fixed line open access infrastructure in South Africa over the coming years. Meanwhile, I thank our loyal customers whose faith in us has been endorsed by long-term commitments; our fantastic teams out in the field and in our various African and UK offices; and our supplier partners who have embraced our culture and goals, working collectively to help us continue on our exciting journey. Kash Pandya Chief Executive Officer Helios Towers | Annual Report 2018 11 Financial StatementsGovernance ReportStrategic ReportOverview Chief Executive Officer’s Q&A Q&A with our CEO Kash Pandya Q Kash, how would you characterise 2018 for Helios Towers? A I’d say it was another excellent year for Helios Towers, and one which demonstrated the attractiveness of our markets and success of our business excellence strategy. Our tenancies and tenancy ratio increased to 13,549 and 2.01x, respectively, and through top-line growth and operational efficiencies we extended our run of Adjusted EBITDA growth to 16 consecutive quarters. In Q1 2015, our Adjusted EBITDA margin stood at 25%. In just over three years, we have doubled our margin and exceeded our target of 50% in Q3 and Q4 2018, hitting 51% and 52% respectively. That’s a fantastic achievement, and one which we hope to continue to improve on. Q So 2018 has been another strong story to add to the investment case? A Absolutely. Our robust tenancy and revenue growth illustrates both the attractive macro dynamics in our markets and the value we are providing through a dedicated focus on critical infrastructure. Add to this the continued margin expansion I just mentioned, and I think it demonstrates the attractiveness of our business model and the power of our business excellence strategy. Rolling out new technologies for improved monitoring and control, reducing tower downtime, training 35% of our staff in Lean Six Sigma – these are some of the outcomes of our strategy and all of which contribute to the attractive margin expansion we’ve delivered over the last few years. Even better, this strategy is transferable across new markets and that’s why we’re excited about our recently announced entry into South Africa. Q How would you describe your markets and their opportunities? A Our markets are some of the most exciting and fast growing in Africa, with young and expanding populations. They are also increasingly urbanised, which correlates well with increased disposable income and demand for infrastructure. At the same time, mobile infrastructure is underpenetrated. There is still so much room for growth in our markets. Take DRC for example: they have a population of 84 million, yet only 37% have a mobile subscription and 50% are within mobile coverage. That’s approximately 50 million of the total population are still to be served and independent forecasts suggest there will be subscriber growth of 8% annually between now and 2023. As a critical mobile infrastructure provider and enabler, these dynamics are very attractive Q The fundamentals seem compelling but how do you control and manage risk in your markets to capitalise on these opportunities? A Risk management is integral to the Group’s strategy and to achieving our goals. We dedicate significant resource to identify, assess, manage and monitor risks. Compliance risk is a particular area of focus and we’re developing a compliance culture through communication, training, sharing knowledge and active guidance. 12 Helios Towers | Annual Report 2018 Strategic ReportWe make sure that all employees, and third parties, are aware of their compliance obligations and responsibilities. An important strength is that a number of our executive team have worked in developing countries and have the necessary experience to drive managing risk from the top. On the ground, we benefit from a workforce that is local and hyper-local. They are connected to the communities where our towers, and our technology, plays a critical part in people’s personal and business lives. So although we have security to protect our towers and our customers’ assets, local communities are invested in welcoming them too. Q In terms of challenges, what was the main area of focus in 2018? A Targeting world-class safety standards in emerging markets, where the safety culture is not as developed as it is in western markets, is a challenge. We come from the angle that only zero harm is an acceptable outcome. So having spent recent years laying the foundations, we were pleased to make some solid progress in essential areas such as working at height, working with power, heavy equipment, lifting, and so on. But our greatest safety risk is actually outside our sites, and that’s from road traffic accidents. Any business working in our markets has the same issues. But we’re working hard on this as well, with more education through initiatives such as defensive-driving training programmes and continued investment in our and our partners’ vehicle fleets. Importantly we are also collaborating with our suppliers and maintenance partners to improve safety standards. We jointly hosted a safety event in Tanzania with Nokia and Delmec. Over two days, delegates attended presentations, round table discussions and practical demonstrations showcasing international best practices. It received such good feedback that we are repeating the event. There is a real commitment to improve safety standards in our markets by many international organisations and I am delighted that Helios Towers is at the forefront of this. It was an excellent year of organic growth. It’s been a year of doing things even better in our markets and raising the bar on what can be achieved. Kash Pandya | Chief Executive Officer Q And how has collaboration progressed with your own partners? Q You decided not to IPO last spring. But were there any positives that came from the experience? A Very well. We’ve invested in collaborating with our maintenance partners, to share the benefits of our culture, values and practices with their organisations. Historically, there had been a them-and- us, customer-contractor relationship, but we swept that away. We launched a programme of physically sharing offices, exchanging ideas, listening to each other and establishing the culture of what we call “One Team, One Business”. One example of this is our investment in Lean Six Sigma training. We have trained 35% of our staff in Lean Six Sigma, and as importantly, we have also trained many of our maintenance partners. This approach means that we have really embedded the Lean Six Sigma philosophy through the value chain, ensuring we are looking at end-to-end solutions, which not only drives reliability up but also costs down. Q Can you point to any standout operational achievements? A There were many operational achievements in 2018, including delivering record results in tower uptime and significantly reducing maintenance site visits. We also continued to rollout the use of ServiceNow in Tanzania, DRC and Congo Brazzaville in the year. The technology gives us complete and real-time visibility on over 87% of our towers, reduces maintenance costs and waste, and further improves our customers’ experience. We expect to roll out ServiceNow in Ghana in 2019 and also drive further operational improvements in Tanzania, DRC and Congo Brazzaville. A Very much so. We spent significant time upgrading our systems and procedures in readiness, and we continue to benefit from that every day in terms of improved visibility and control. We further upgraded our processes and compliance to levels required by the Stock Exchange, and appointed a Head of Compliance. These increased standards are now business as usual. And it means that if and when we like the look of market conditions in the future, we’ll be ready. Q Finally, you said 2018 has really been about organic growth in current markets. Will that be the script for 2019 as well? A Certainly organic growth is a key driver for 2019. We are focused on continuing to capitalise on the considerable potential in our existing markets, and to provide the critical infrastructure for our customers’ end-users’ demand. But another key element of our 2019 strategy will be growth in new markets, and we’re excited to have kicked that off with our South Africa expansion. We have long considered it to be an attractive market due to its economic growth, population demographics and demand for advanced mobile services. Our partnership with Vulatel provides the platform we need to leverage the large wireless and fixed line open-access infrastructure opportunity ahead, and our acquisition of SA Towers only solidifies this. Having raised a US$100 million term loan for growth, we have the balance sheet to drive our expansion plans in both our existing and new markets and leverage our expertise to deliver for our customers, employees, investors and communities. Helios Towers | Annual Report 2018 13 Financial StatementsGovernance ReportStrategic ReportOverview Chief Financial Officer’s statement Creating confidence through performance We can look back on another very strong year. We closed 2018 with our 16th consecutive quarter of Adjusted EBITDA growth, continuing an uninterrupted growth story that began back in Q1 2015. Revenue growth We continued to support our customers’ rapid coverage, capacity and technology expansion needs. Our revenue growth of 3% was driven by organic demand in all of our markets. Helios Towers delivered another year of impressive growth and margin expansion. Strong macro trends, a robust business model and focus on operational excellence continued to drive impressive results. Additionally, we further strengthened our balance sheet through reducing leverage and increasing capital available for deployment. In summary, 2018 saw us deliver another year of robust growth and improve our positioning for future organic and inorganic opportunities. Group performance In 2018, revenues grew by 3% from US$345 million to US$356 million and Adjusted EBITDA increased by 22% to US$178 million. As a result, Adjusted EBITDA margins expanded from 42% to 50%, in line with our expectations. We also achieved our first operating profit in a fiscal year, achieving a profit of US$3 million and increasing by US$27 million from an operating loss of US$24.0 million in 2017. 2018 saw us deliver another year of robust growth and improve our positioning for future organic and inorganic opportunities. Tom Greenwood | Chief Financial Officer Adjusted EBITDA margin +8 percentage points 2018: 50% 2017: 42% 14 Helios Towers | Annual Report 2018 Notably, 87% of revenues in 2018 were from Africa’s “Big 5” MNOs and 57% was denominated in hard currencies, either in US dollars or EUR pegged. Looking forward, we are well positioned with US$3.1 billion in contracted revenue with an average remaining life of 8.1 years. Adjusted EBITDA margin growth This year we passed a significant milestone in achieving a 52% Adjusted EBITDA margin in Q4 2018, up from 25% in Q1 2015 and reflecting 16 consecutive quarters of Adjusted EBITDA growth. This demonstrates the strong operational leverage of our business, and focus on business excellence. In 2018, we continued to reduce the cost of delivering reliable power to our towers. This was achieved through installing 131 solar solutions, 46 grid connections, and 390 hybrid solutions. Adding to our prior installations, we have now rolled out over 430 solar solutions, 400 grid connections and 640 hybrid solutions. We also pioneered new technology through the digitalisation of our field operations with ServiceNow. This technology significantly improves the maintenance and control of our assets through providing real- time monitoring. It also drives up service quality to our customers. Strategic ReportAdjusted EBITDA growth (US$m) Margin 25% 27% 28% 28% 35% 35% 39% 38% 40% 40% 42% 46% 47% 49% 51% 31 32 33 35 37 41 42 44 45 52% 47 11 12 15 16 21 21 Q1’15 Q2’15 Q3’15 Q4’15 Q1’16 Q2’16 Q3’16 Q4’16 Q1’17 Q2’17 Q3’17 Q4’17 Q1’18 Q2’18 Q3’18 Q4’18 Looking to 2019, we expect to continue achieving operational improvements, and to further benefit from strong operating leverage and available capacity on our existing asset base. Liquidity and net debt position We are well positioned to capitalise on the organic and inorganic opportunities available, in part due to: • US$100 million term loan raised in Q4 2018, which will be used for future expansion in existing and new markets and for general corporate purposes. As at 31 December 2018, US$25 million was drawn; • unlevered recurring free cash flow(1) of US$158 million in FY18, up 29% from FY17; • net leverage(2) level of 3.5x in Q4 2018, decreasing from 3.6x in Q4 2017 and at the lower end of our 3.5-4.5x target range; and • significant liquidity options including cash on the balance sheet of US$90 million, term loan availability of US$75 million, and a revolving credit facility of US$60 million, amounting to a total of US$225 million liquidity available at year-end 2018. During 2018 we also maintained our credit ratings of B2 corporate family rating (“CFR”) by Moody’s Investors Service and a preliminary B long-term corporate credit rating by S&P. As well as positioning us to maximise possible opportunities, we were pleased to receive this further endorsement of our strategy and team. Dividend Given our ambitions to invest in our current businesses and expand into new markets, the Directors recommended that no dividends be paid for the year ended 31 December 2018. Outlook We are confident and excited as we enter 2019, and are targeting another year of growth, both organically in our existing markets and through continuing to explore further expansion and acquisition opportunities across the African continent. Tom Greenwood Chief Financial Officer Material recent developments South African partnership with Vulatel Acquired controlling interest in SA Towers US$100m term loan facility • In January 2019, announced South African partnership with Vulatel • Expect to make major greenfield wireless and fixed-line telecoms infrastructure investments in South Africa • South African expansion provides Helios Towers further geographic diversification into a fifth country; one of the largest and most attractive markets in Africa • In January 2019, also announced first investment in South Africa - the acquisition of a controlling interest in the business of SA Towers • Includes a pipeline of potential tower sites on more than 500 urban locations across the country • In October 2018, signed a US$100 million term loan facility with The Standard Bank of South Africa Limited (mandated lead arranger), Barclays Bank Mauritius Limited and The Mauritius Commercial Bank Limited • The facility will be used to support our intentions to seek opportunities in new markets across Africa, including South Africa, as well as future expansion in our current markets and general corporate purposes (1) Calculated as Adjusted EBITDA less tax paid less maintenance and corporate capital expenditure (2) Calculated as net debt divided by annualised Adjusted EBITDA for the quarter Helios Towers | Annual Report 2018 15 Financial StatementsGovernance ReportStrategic ReportOverview Business model Our vision is to be the leading African telecom tower company Our strengths and market opportunities Our operating platform Financial model • Long-term contracts • Stable cash flows We have an efficient tower-sharing model Market context • High growth markets with limited infrastructure in place • Significant future growth expected Our people • Localised workforce • Highly experienced management team Strong relationships • With customers and suppliers • Best-in-class customer experience Innovation and technology • Digital solutions • Innovative use of renewable power sources 16 Helios Towers | Annual Report 2018 Anchor tenants Colocation tenants Amendment colocations We provide reliable power sources to tenants On-grid Diesel Hybrid and solar We add ancillary services Data centres Fibre backhaul Small cells Strategic ReportOur long-term growth strategy Our stakeholders We have three strategic priorities 1 Growth • In existing markets • In new markets • In new products and services 2 Business excellence • Supply chain optimisation • Business digitalisation • Lean Six Sigma 3 Sustainability • Building partnerships • Training local people • Environmental responsibility • Embedding our values Society We contribute to building local economies that enable businesses and individuals to grow. Employees We provide employment and training opportunities for local people, with us and our partners. Environment We reduce environmental impacts through our sustainable operating platform. Shareholders We offer financial returns and significant opportunities for future growth. Helios Towers | Annual Report 2018 17 Financial StatementsGovernance ReportStrategic ReportOverview Market overview Why Africa? Vast territories, growing young populations, under-penetrated with minimal fixed line infrastructure; the African market fundamentals for mobile are compelling. African markets: dynamics and characteristics The UN forecasts population growth across the continent of Africa will triple in this century, to around 4.5 billion. Africa is also one of the world’s most rapidly urbanising populations. Of the world’s top ten fastest-growing cities, all are African and two are in our markets of DRC (Kinshasa) and Tanzania (Dar es Salaam). These strong population trends are further enhanced by impressive GDP growth across Africa to create a compelling macro environment for investment. Of the World Bank’s top ten fastest-growing economies in 2018, six are in Africa (including our markets of Ghana and Tanzania). Top ten fastest-growing economies(1) (2018) Top ten fastest-growing cities(2) (2018-2035E) 6 in Africa incl. Ghana and Tanzania 10 in Africa incl. Kinshasa and Dar es Salaam ) s n o i l l i b ( n o i t a u p o P l 6 5 4 3 2 1 0 Forecast Africa 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 Africa Asia Latin America and the Caribbean Northern America Europe (1) World Bank, 2018 (2) United Nations Population Prospects, 2018 18 Helios Towers | Annual Report 2018 In Africa, multiple metrics support the case for investment in mobile and infrastructure: • A growing population. The total population of Africa is expected to more than triple over the next 80 years, significantly faster than any other region. • A young, receptive population. Africa has the largest proportion of the population under 30 years old. This is the demographic that embraces technology, and consumes data through services such as WhatsApp, Twitter and Instagram. This drives MNOs to continue significant investment in improving and expanding their networks in our markets. • An urbanising population. The top 10 fastest-growing cities to 2035 are expected to be African, and two are in our markets of DRC (Kinshasa) and Tanzania (Dar es Salaam). • Poor fixed line availability. With limited or no fixed line availability, communicating across the vast African territories is predominately through mobile. Helios Towers is well positioned to benefit from the resulting growth in under-penetrated markets in Africa. Strategic Report Our markets We are in our markets by design. We have targeted markets with high population growth, underpenetrated mobile services and with multiple MNOs as customers. Our markets: dynamics and characteristics Tanzania DRC In 2018, Tanzania was one of the fastest- growing economies in the world and Dar es Salaam is forecast to be one of the fastest- growing cities globally. Tanzania has experienced strong mobile subscription growth of 9% CAGR between 2011 and 2017, and independent forecasts expect a further 6% CAGR to 2023. Similar to our other markets, strong macro and demographic trends in Tanzania are driving demand for mobile and telecommunications infrastructure. The MNOs continue to see potential and invest. In 2018, Vodacom and Azam were both awarded 4G licences which should drive the need for more PoS. DRC is the second largest country in Africa and covers an area the size of Western Europe. Its population exceeded 84 million in 2018, and is forecast to reach almost 100 million within the next five years. By 2035, the UN predicts that the population will double in Kinshasa, the DRC’s capital city, making it the seventh largest city in the world. However, mobile penetration is low at 37% and only 50% of the country has mobile coverage today. The scope for growth is therefore vast. Between 2011 and 2017 DRC saw significant mobile subscription growth of 16% annually, and independent forecasts project a further 8% CAGR to 2023. Recently awarded 4G licences to Orange, Africell and Vodacom add to the potential growth and demonstrate the demand for better connectivity. Subscriber growth(1) (Q317-Q318) +7% Mobile penetration(1) 40% Subscriber growth(1) (Q317-Q318) +12% Mobile penetration(1) 37% (1) GSMA estimates, 2018 (1) GSMA estimates, 2018 Helios Towers | Annual Report 2018 19 Financial StatementsGovernance ReportStrategic ReportOverview Market overview Continued We’ve chosen these markets because they are some of the fastest-growing markets on the planet. It is forecast that there will be 48 million additional new phone subscribers in our four established markets by 2023. Tom Greenwood | Chief Financial Officer Our markets: dynamics and characteristics (continued) Ghana 3 Congo Brazzaville The most advanced of our markets with 53% mobile penetration, Ghana also has high smartphone ownership which drives increased demand for data. Between 2011 and 2017 Ghana saw mobile subscription growth of 9% annually, and independent forecasts project a further 4% CAGR to 2023. This is supported by government-led initiatives, such as the rural telephony project, which will accelerate mobile penetration in the country and drive organic growth for our business. In 2017, a significant merger took place between Airtel and Tigo, with the new operation taking the No. 2 spot. The merger is expected to catalyse network investment by operators as competition ramps up, and create further opportunities for our business. 4G licence launches have driven higher data demand, and our towers are well located to meet increasing densification requirements. Congo Brazzaville is our smallest market, with a population of 5 million. It has mobile penetration of 46% and experienced strong mobile subscription growth of 4% annually between 2011 and 2017. Independent forecasts expect a further 3% CAGR to 2023. Subscriber growth(1) (Q317-Q318) +1% Mobile penetration(1) 53% (1) GSMA estimates, 2018 20 Helios Towers | Annual Report 2018 Subscriber growth(1) (Q317-Q318) +1% Mobile penetration(1) 46% (1) GSMA estimates, 2018 Strategic ReportHelios Towers | Annual Report 2018 21 Strategic ReportFinancial StatementsGovernance ReportOverviewStrategy in action New markets Helios Towers enters South Africa As well as exploring opportunities within our existing markets, our strategy has also been to investigate new attractive African markets where we can expand our geographic footprint and product offering. In January 2019 we were pleased to announce our entry into South Africa through our partnership with Vulatel and subsequent acquisition of SA Towers. As a leading African independent tower company, South Africa is a market we have been looking to enter for some time due to its economic growth, population demographics and demand for advanced telecommunications services. opportunities through supporting the growth strategies of all the MNOs by building towers and other open access infrastructure in the country, providing support for their current 4G needs and additional requirements for their extensive rollout plans for 5G networks. South Africa is one of the continent’s largest economies and has a population of 57 million, which is forecast to increase by a further three million over the next five years. Similar to our other markets, the young and increasingly urbanised population are driving the demand for improved mobile connectivity. There are roughly 30,000 towers in South Africa, with only 10% owned by independent tower companies. In addition to the significant inorganic opportunities, there are organic Partnership with Vulatel Local insight and expertise is an important component of any Helios Towers expansion plan. Therefore we were delighted to create the Helios Towers South Africa (“HTSA”) infrastructure platform through a partnership with local experts Vulatel (Pty) Ltd (“Vulatel”). Vulatel is led and run by ex-Vodacom Directors who have deep telco sector expertise and local credentials. Vulatel is a 69% black-owned and 45% black women- owned business with a Level 2 B-BBEE (Broad Based Black Economic Empowerment) rating. SA Towers acquisition Following the announcement of our partnership, we were thrilled to announce that HTSA had taken a controlling stake in local tower company, SA Towers. This young company, created in 2016, already has a pipeline of potential tower sites, ready to be built or in the permitting process, in more than 500 urban locations. The agreement gives HTSA rapid scale and local town planning expertise in South Africa, as we offer infrastructure and build support to MNOs looking to advance their 4G and 5G networks. Outlook South Africa represents an exciting new market for Helios Towers and through our partnership with Vulatel and the acquisition of SA Towers we have the foundations to support the forecasted strong growth of MNOs in South Africa for the coming years. 22 Helios Towers | Annual Report 2018 Strategic ReportPopulation 57m % urbanised 66% Towers c.30,000 % towers owned by independent operators c.10% I am thrilled to announce our entry into South Africa, which delivers against our stated strategy of providing MNOs with open-access infrastructure to meet the growing demands of their customers in Africa for fast, stable and available networks. Kash Pandya | Chief Executive Officer Helios Towers | Annual Report 2018 23 Helios Towers | Annual Report 2018 23 Strategic ReportFinancial StatementsGovernance ReportOverviewStrategy in action Continued Organic growth Completed: 1,800km communications backbone in DRC Organic growth within our markets is a key focus area, delivering leading-edge infrastructure to the populations our customers want to serve, regardless of geography. In 2018 we announced the construction of a new communications backbone network to deliver high capacity microwave technology to DRC. Spanning the equivalent distance of London to Rome, the investment focuses on the equatorial rainforest and the Kasaï-Central province. The backbone comprises towers at least 80 metres in height, standing above the forest canopy and interspersed at distances of up to 40km. Together, they will deliver new and improved mobile services to some six million citizens. Why is the project needed? The telecommunications market in DRC is already one of the fastest growing in Africa, and the inaugural 4G licences awarded to the major operators in 2018 are expected to drive further robust growth. 24 Helios Towers | Annual Report 2018 Our new microwave backbone will replace existing satellites, allowing operators to extend their coverage in DRC and have the infrastructure to be able to further market 3G and, soon, 4G services. Each heavy-duty tower has been specially designed and fabricated for decades of service ahead. This means allowing ample capacity for the big three MNOs to colocate, densify and expand their networks in the future. Execution excellence The lack of road access to many of the sites, as well as physical obstructions and heavy seasonal rains, meant that the project demanded exceptional planning and a determined team. The furthest site location meant mobilising the teams and all materials some 1,200km away from the project’s central warehouse. The experience we have gained positions us well as we address further expansion projects in our markets, and beyond. Strategic ReportWe built a backbone to make sure there is the infrastructure to provide network coverage in new territories of DRC. This provides mobile signal to six million more people. Kash Pandya | Chief Executive Officer Helios Towers | Annual Report 2018 25 Strategic ReportFinancial StatementsGovernance ReportOverviewStrategy in action Continued Operational excellence The digitalisation dividend Customised digital tools are equipping teams to deliver world-class operations and maintenance. A key element of our proposition is an ability to deliver a reliable, fully powered fleet of towers, at a highly competitive rate. This requires a complete understanding between our operating companies and our maintenance partners. To achieve this, we created a “One Team, One Business” strategy that extended to sharing offices, the same operations management systems, and joining our Lean Six Sigma training. Significantly, the entire operation has harnessed the opportunities of digitalisation. Our teams take smartphone technology into the field, delivering consistent and analysable data. This informs our customised ServiceNow platform, which, in 2018, gave us complete and real-time visibility of all of our towers in Tanzania, DRC and Congo B. The smartphone technology enables the collection of data from all areas of the network, thereby enabling our management teams to optimise service deployments and react to live circumstances. This combination of better information, teamwork, and smarter working has delivered some remarkable results. In Tanzania, for example, 12 months of this digitalisation programme has: • Reduced reported site outages by 59% from Q1 2018 to Q4 2018; • improved time-to-fix by 25% for first-time fixes; and • reduced time spent manually recording and documenting issues by over 50%. Two years ago, service visits in Tanzania averaged 6.2 per month; now, they’re at 1.5 per month. In a country where road accidents are our highest risk, this means we have driven 266,000 fewer kilometres a month than the previous two years – as well as reducing emissions through saving 38,000 litres of fuel a month. This initiative won the Tower Exchange’s Operational Efficiency Initiative of the Year 2017, and its multiple benefits flowed through into 2018. 26 Helios Towers | Annual Report 2018 Strategic Report We have created a “One Team, One Business” ethos with our partners that extended to sharing offices and taking part in joint Lean Six Sigma training. Kash Pandya | Chief Executive Officer Service visits in Tanzania averaged 1.5 per month 2016: 6.2 per month, prior to new process implementation Helios Towers | Annual Report 2018 27 Strategic ReportFinancial StatementsGovernance ReportOverviewSustainability Our continued focus on safety, efficiencies and impact At Helios Towers we believe a sustainable business must succeed against three distinct measures. (1) It must be built on enduring and efficient economics. (2) It must recognise that a company is a group of people, and one that treats everyone fairly, equally and safely. (3) And it must be accountable for its actions on the land and the planet. Our goal is to excel in each. As a young company we still have a journey ahead, but we have made significant and certified progress in 2018. Our business proposition Our business plays a vital role in the daily lives of people and businesses across Africa. Our sharing model enables MNOs to colocate their equipment onto single tower locations. This immediately removes the need for wasteful duplication, unnecessary tower constructions, multiple power generators and emissions, and many thousands of miles driven in parallel maintenance programmes. Going home safe, every day We are only satisfied when we can close every day with zero harm recorded, for both our employees and our partners. In 2018, we were pleased to see an improving trend in health and safety, as the training we put in place in previous years began to manifest itself in safer behaviours. 28 Helios Towers | Annual Report 2018 Strategic ReportDuring the year, we were delighted to see zero lost-time injuries among our employees for the second year running. However, in common with many businesses in Africa, road traffic accidents remain the biggest single safety risk factor we face. In response, we have trained more than 450 people in defensive driving techniques – and this is just one of the comprehensive programmes we have implemented to heighten driver awareness, vehicle safety and better behaviours through remote monitoring. We also took the lead, together with Nokia and one of our key partners and structural consultants, Delmec, in creating a new industry event to promote safer working at height and heavy lifting (see page 31). Local businesses, local people As our local businesses grow, we have progressively reduced the need for expatriates. The vast majority of our people are local, bringing insights and market knowledge that they, uniquely, possess. In every country, we offer equal opportunities for all and do not discriminate on grounds of gender, faith, ethnicity, disability or orientation. We pay fair market rates, and every direct employee earns more than the statutory minimum wage. Case study Mobile charge, free of charge During 2018 we trialled a new initiative to benefit our local communities in Tanzania and DRC. We installed solar-powered street lights at two of our sites in Tanzania and five in DRC, but with a difference: they each have in-built USB ports where local people can bring their mobiles and recharge them. In Tanzania, we have also created small covered areas where they can sit and wait. In some cases, these have been built using steel repurposed from old towers that we have decommissioned as we have optimised our network. We’re delighted to make this gesture to our local communities, which also encourages the use of our customers’ networks. Initial feedback has been very positive, and we are looking to extend the concept across all our markets. Helios Towers | Annual Report 2018 29 Financial StatementsGovernance ReportStrategic ReportOverviewInvesting in talent 35% of our employees trained in Lean Six Sigma Environmental focus 430 sites equipped with solar technology Investing in talent In 2018, we reinforced our emphasis on local talent with a continuing and significant investment in Lean Six Sigma Orange Belt and Black Belt training. Although primarily for our own employees, this has also included certain members of our maintenance partners, strengthening our highly productive “one team” ethos. By the end of 2018, 35% of our people had been through this training, and we are targeting 50% by the end of 2019. We also introduced Mind Gym training, which specialises in leadership development. Our environmental focus Every business brings with it an environmental impact. In our case, we erect towers in order to connect populations, and we use fuel to power our generators and to travel to our sites to maintain them. In 2018 we continued our programme to find ways of minimising those impacts. We equipped a further 131 tower locations with solar technology, bringing the total to 430. We also made 46 further connections to power grids where they’re available, and created a further 390 hybrid solutions. The investment in solar technology and hybrid solutions in 2018 will avoid the emission of more than 5,000 tonnes of CO2 each year moving forward, while also delivering millions of dollars in fuel cost savings. By developing smarter, leaner programmes with our partners, we have also slashed the number of maintenance miles we drive. In Tanzania alone, by reducing our site visits to 1.5 per month we travelled 266,000 fewer kilometres a month compared to 2016, before implementation of these programmes. This saved a further 72 tonnes of emissions and, as importantly, reduced road risks by taking 2,163 fewer monthly journeys. In many cases, our business model allows operators to dismantle and recycle their existing towers, because we can meet their needs more effectively. This also lessens the visual impact on the landscape, and with this in mind we are developing a number of ways of concealing our smaller urban equipment. These include hiding in street furniture and building “palm tree” antennae. Certified operations In early 2018 we were pleased to gain the integrated certifications of ISO 9001 (for quality management systems), 14001 (environmental management) and OHSAS 18001 certification (occupational health and safety management). These apply to all of our African- based businesses. Our London office gained ISO 9001 recognition to add to the OHSAS 18001 certification it already held. We are now preparing for ISO 37001 (anti-bribery and corruption), to gain formal recognition for the rigorous controls and systems that we have put in place. Sustainability Continued Local workforce (%) Tanzania 96% DRC 97% Ghana 96% Congo B 96% 30 Helios Towers | Annual Report 2018 Strategic Report Strengthening compliance Like health and safety, it is of paramount importance to us that compliance is front-of-mind in every employee. We reinforced our commitment to this area in late 2017 through creating a new role - Group Head of Compliance. This was followed by a comprehensive set of new or upgraded compliance policies and procedures, which became effective from 1 January 2018. They range from acting with integrity and third-party due diligence, to GDPR and modern slavery, each sitting alongside and reinforcing our existing code of business conduct. As importantly, we also initiated a programme to embed these new policies into business-as-usual behaviour, with tailored training that aligned specific content to relevant job roles; for example, financial probity for colleagues working in procurement. Case study Lifting safety to new heights Helios Towers is not only determined to operate to the highest standards of safety, but to work with other organisations to improve the standards across the industry as a whole. Safety is a priority across all of our business, and we take pride in being a leader and pushing for improved safety standards. In 2018, we co-launched a safety conference together with Nokia and our structural tower consultants, Delmec. This inaugural event was held in Dar es Salaam, Tanzania and focused on one of the highest areas of risk for all three companies – lifting and working on towers. At the event, best practices were discussed and techniques and technologies were demonstrated that not only protect a workforce and reduce potential risks, but can also help deliver return on investments. With its mix of presentations, panel discussions and workshops, the event brought together health and safety officers, suppliers, customers and regulators. The feedback was overwhelmingly positive, leading to a second event being held in Nairobi, Kenya in January 2019. Helios Towers | Annual Report 2018 31 Financial StatementsGovernance ReportStrategic ReportOverviewSustainability Continued Sustainability Sustainability through connectivity As we build infrastructure that takes mobile into rural Africa, we are helping remote communities to develop and thrive in new ways. We believe we have a duty to help sustain the local African communities where we operate. We offer high- quality employment, directly and indirectly, and train and develop localised workforces. Masai-tribe.com, where they can now offer a host of exciting possibilities to the world: from a visit to their villages, to longer stays and accommodation in their huts for a true Masai experience, to safaris. But in addition, our infrastructure is also playing a key role in sustaining communities. By owning and operating critical mobile communications infrastructure, we enable mobile operators to expand their networks more efficiently, and in turn, help people to generate income and develop their communities. Just one example is the Masai tribe in the Manyara Region of Tanzania. Since our towers brought network coverage to their locality, this tribe has captured the opportunities of mobile voice and data communications. They are now active users of social media including Facebook, Instagram, Twitter and YouTube. This drives tourism traffic to their new website, Together with sales of hand-crafted jewellery, clothing and other souvenirs, the tribe has been able to generate new sources of income. In turn, this has enabled them to build their own kindergarten and prepare children for secondary school and beyond. In the same way, populations throughout our markets are discovering new opportunities through services including online banking, healthcare, news, and the breadth and depth of the internet reaching new people and places all the time. We’re proud of the part we play in building this connectivity, and delivering meaningful social benefits across the continent of Africa. 32 Helios Towers | Annual Report 2018 Strategic ReportHelios Towers | Annual Report 2018 33 Strategic ReportFinancial StatementsGovernance ReportOverviewOperating review Partnering with our customers We partner with our customers to provide critical mobile infrastructure and services, supporting their rollout and network coverage plans. Across our markets MNOs continue to invest to improve and expand their networks. In 2018, operators continued to roll out 3G and invest in 4G, evident through Tanzania and DRC awarding a number of new 4G licences. Accordingly, we worked with MNOs to roll out more sites and increase standard and amendment colocations. We also drew on deep experience to help newly merged networks maximise the benefits of integration. Most notably in 2018, we won an open tender that followed the Airtel/Tigo merger in Ghana. The renegotiated contract showed partnership at its best: the new entity achieved the efficiencies it required, and Helios Towers gained long-term Adjusted EBITDA growth through a contract extension from five years to fifteen years. 34 Helios Towers | Annual Report 2018 Tanzania Key highlights (US$ millions) Revenue Adjusted EBITDA Total sites Total tenancies Tenancy ratio FY18 FY17 149.9 86.2 3,701 7,848 2.12x 141.2 66.8 3,491 7,392 2.12x One of our strongest performing markets in 2018, with revenues increasing by 6.1% and Adjusted EBITDA growth of 28.9%. This was driven by significant investment, with MNOs upgrading their networks to deliver next-generation services across our infrastructure. We also helped operators to grow coverage and develop commercial offerings tailored to rural areas. Tenancies increased by 456 to 7,848 and sites increased by 210, to 3,701. Our tenancy ratio was 2.12x at year end. Following the recent 4G auction, Vodacom and a new MNO, Azam, who recently entered the market, were awarded licences. We expect to see continued growth as MNOs expand and improve their networks. Adjusted EBITDA growth 29% 2018: US$86.2m 2017: US$66.8m Strategic ReportDRC Key highlights (US$ millions) Revenue Adjusted EBITDA Total sites Total tenancies Tenancy ratio Ghana Key highlights (US$ millions) Revenue Adjusted EBITDA Total sites Total tenancies Tenancy ratio FY18 FY17 140.9 72.5 1,773 3,492 1.97x 140.2 66.5 1,819 3,347 1.84x Congo B Key highlights (US$ millions) Revenue Adjusted EBITDA Total sites Total tenancies Tenancy ratio FY18 FY17 41.0 22.8 891 1,680 1.89x 40.1 17.8 825 1,723 2.09x FY18 FY17 24.3 12.1 380 529 1.39x 23.4 9.8 384 525 1.37x Given the low levels of mobile penetration in DRC, it represents a market with significant growth potential. We are well positioned to provide the critical infrastructure to improve the coverage that is demanded. Tenancies increased by 145 to 3,492 at the end of 2018, with 118 additional tenancies coming in the fourth quarter, positioning us well as we enter 2019. Revenues and Adjusted EBITDA increased 0.5% and 9.0% respectively in the year. Power expenses were reduced by over US$3 million in the year, partially driven by investments in solar technology, grid connections and hybrid solutions. The Airtel/Tigo merger in Ghana, signed in October 2017, led to an excellent outcome for Helios Towers in 2018. Our smallest market has delivered a solid performance in operational excellence and service delivery. In an open tender, we were selected as the tower company of choice for the new entity, which has become the No. 2 operator in Ghana. The new contract extends our agreement from 5 to 15 years, offsetting a minor net reduction of colocations. Total sites increased by 66 to 891, and tenancies decreased by 43 to 1,680, reflecting the impact of the Airtel-Tigo merger. Revenues increased 2.1% from US$40.1 million to US$41.0 million, and Adjusted EBITDA increased 28.1% from US$17.8 million to $22.8 million, driven primarily by a reduction in operating expenses. This is best highlighted by our Adjusted EBITDA margin growth, which expanded 790 basis points from 41.9% in 2017 to 49.8% in 2018. Through improvements in our procurement process, we lowered maintenance costs by US$1.0 million year-on-year. In addition, we also reduced SG&A expenses by US$0.6 million. As a result, Adjusted EBITDA increased by 23.7% to US$12.1 million. Total sites decreased by 4 to 380, and tenancies increased by 4 to 529. Adjusted EBITDA growth Adjusted EBITDA growth Adjusted EBITDA growth 9% 2018: US$72.5m 2017: US$66.5m 28% 2018: US$22.8m 2017: US$17.8m 24% 2018: US$12.1m 2017: US$9.8m Helios Towers | Annual Report 2018 35 Financial StatementsGovernance ReportStrategic ReportOverviewDetailed financial review Consolidated Statement of profit or loss For the year ended 31 December 2018 Revenue Cost of sales Gross profit Administrative expenses Loss on disposal of property, plant and equipment Operating profit/(loss) Investment income Other gains and losses Finance costs Loss before tax Tax expense Loss for the year Key metrics 2018 US$’000 2017 US$’000 356,049 (255,848) 344,957 (275,651) 100,201 69,306 (91,059) (5,835) (91,261) (2,018) 3,307 (23,973) 951 (16,831) (107,005) 706 21,797 (102,757) (119,578) (104,227) (4,369) (3,207) (123,947) (107,434) (US$millions) 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 Group Tanzania DRC Congo Brazzaville Ghana Revenue Gross margin(1) Sites at beginning of year Sites at year end Tenancies at beginning of year Tenancies at year end Tenancy ratio at year end Adjusted EBITDA Adjusted EBITDA margin $356.0 $345.0 $149.9 65% 3,491 3,701 7,392 56% 6,477 6,519 12,987 12,509 63% 6,519 6,745 12,987 13,549 1.99x 2.01x $177.6 $146.0 42% 50% 7,848 2.12x $86.2 57% $141.2 56% 3,465 3,491 7,163 7,392 2.12x $66.8 47% $140.9 60% 1,819 1,773 3,347 3,492 1.97x $72.5 51% $140.2 55% 1,832 1,819 3,179 3,347 1.84x $66.5 47% $24.3 67% 384 380 525 529 1.39x $12.1 50% $23.4 61% 394 384 529 525 1.37x $9.8 42% $41.0 66% 825 891 1,723 1,680 1.89x $22.8 56% $40.1 56% 786 825 1,638 1,723 2.09x $17.8 44% (1) Gross margin means gross profit, adding back site and warehouse depreciation, divided by revenue. Revenue Revenue increased by 3% to US$356.0 million in the year ended 31 December, 2018 from US$345.0 million in the year ended 31 December, 2017. The increase in revenue was largely driven by colocation, amendment, and build-to-suit revenues. Increased revenue in Tanzania of 6% year on year, was primarily attributable to the increase in overall tenancies from 7,392 to 7,848 as of 31 December, 2017 to 31 December, 2018. Revenue growth in DRC Congo Brazzaville and Ghana was driven by an increase in build-to-suit revenues. 36 Helios Towers | Annual Report 2018 Strategic reportCost of sales (US$’000s) Power Non-power Site depreciation Total cost of sales Year Ended 31 December, % of Revenue % of Revenue 2018 81,886 49,870 124,092 255,848 2018 23.0% 14.0% 34.9% 71.9% 2017 93,756 58,679 123,216 275,651 2017 27.2% 17.0% 35.7% 79.9% The table below shows an analysis of the cost of sales on a country-by-country basis for the years ended 31 December, 2017 and 2018. Tanzania DRC Congo Brazzaville Ghana (US$’000s) Power Non-power Site depreciation Total cost of sales Year Ended 31 December Year Ended 31 December Year Ended 31 December Year Ended 31 December 2018 2017 2018 2017 2018 2017 2018 2017 29,128 23,491 54,788 35,413 27,415 55,681 39,315 17,658 50,156 42,330 20,459 48,634 107,407 118,509 107,129 111,423 2,998 5,083 11,332 19,413 2,722 6,365 11,301 20,388 10,445 3,638 7,816 21,899 13,291 4,440 7,600 25,331 Cost of sales decreased by 7% to US$255.8 million in the year ended 31 December, 2018 from US$275.7 million in the year ended 31 December, 2017. The overall decrease in cost of sales was primarily due to the decreased power and non-power costs discussed below. Site depreciation increased by 1% from US$123.2 million to US$124.1 million. Gross margin improved from 56% for the year ended 31 December 2017, to 63% for the year ended 31 December, 2018, due to the decreased cost of sales year on year. Power costs comprise of diesel and electricity costs. The Group’s costs decreased by US$11.9 million, or 13% year on year, partially driven by operational improvements across the Group. The decrease of US$11.9 million reflects US$6.3 million lower power expenses in Tanzania, US$3.0 million in DRC, and US$2.8 million in Ghana. Power expenses in Congo Brazzaville increased slightly from 2017. Non-power costs relate to maintenance and security costs, insurance and other costs. Non-power costs decreased by 15% for the year ended 31 December, 2018 compared to the year ended 31 December, 2017. The decrease in non-power costs were primarily a result of Group wide operational improvements. Administrative expenses (US$’000s) Other administrative costs Depreciation and amortisation Exceptional items Total administrative expense Year Ended 31 December % of Revenue % of Revenue 2018 48,989 17,236 24,834 91,059 2018 13.8% 4.8% 7.0% 25.6% 2017 2017 47,859 25,621 17,781 91,261 13.9% 7.4% 5.2% 26.5% Administrative expenses decreased year on year, at US$91.1 million in the year ended 31 December, 2018 from US$91.3 million in the year ended 31 December, 2017. Helios Towers | Annual Report 2018 37 OverviewFinancial StatementsGovernance ReportStrategic Report Detailed financial review Continued Administrative expenses (continued) Exceptional items increased from US$17.8 million to US$24.8 million, which is mainly in relation to the exploration of strategic options for the Group including, but not limited to, a potential London Stock Exchange (“LSE”) listing. See note 4 for more details. This increase was offset with savings in depreciation and amortisation year on year. The decrease in amortisation for the year is in relation to the non-compete agreement with Airtel which had a fair value of $30 million, and was fully amortised between May 2016 and July 2017. Loss on disposal of property, plant and equipment Loss on disposal of property, plant and equipment was US$5.8 million in the year ended 31 December, 2018, compared to US$2.0 million during the year ended 31 December, 2017. Loss on disposal was primarily a result of site upgrades that necessitated the replacement of older parts and equipment in DRC. Other gains and losses Other gains and losses recognised in the year ended 31 December, 2018 were a loss of US$16.8 million, compared to a gain of US$21.8 million in the year ended 31 December, 2017. The primary reason is the decrease in the fair value of the embedded derivative valuation related to the bond. Finance costs Finance costs increased to US$107.0 million in the year ended 31 December, 2018 from US$102.8 million in the year ended 31 December, 2017. The table below shows an analysis of finance costs for the years ended 31 December, 2017 and 2018. (US$’000s) Foreign exchange difference Interest costs Interest costs on lease liabilities Deferred loan cost amortisation Finance costs Year Ended 31 December 2018 2017 18,029 73,856 15,120 – 3,229 71,608 14,991 12,929 107,005 102,757 As reflected in the table above, the increase in finance costs between the years was primarily the result of interest for the US$600 million 9.125% bond. The increase in finance costs year on year primarily relates to the foreign exchange differences, driven by the Tanzanian shilling. This is offset with a decrease in relation to deferred loan cost amortisation costs in the year ended 31 December, 2017. Tax expense Our tax expense was US$4.4 million in the year ended 31 December, 2018 as compared to US$3.2 million in the year ended 31 December, 2017. Our tax expense during each year is primarily due to an additional tax levied against certain entities in Tanzania and DRC as stipulated by law in these jurisdictions. The year on year increase is driven by tax rates and Ghana became tax paying during the year ended 31 December, 2018. Adjusted EBITDA Adjusted EBITDA was US$177.6 million in the year ended 31 December, 2018 compared to US$146.0 million in the year ended 31 December, 2017. The increase in Adjusted EBITDA between years is primarily attributable to the changes in revenue, cost of sales, and gross margin between years, as discussed above. 38 Helios Towers | Annual Report 2018 Strategic reportContracted Revenue The following tables provide our total undiscounted contracted revenue by country and by key customer under agreements with our customers as of 31 December, 2018 for each of the years from 2019 to 2022, with local currency amounts converted at the applicable spot rate for US dollars on 31 December, 2018 held constant. Our contracted revenue calculation for each year presented assumes: (i) no escalation in fee rates, (ii) no increases in sites or tenancies other than our committed colocations described elsewhere in these financial statements, (iii) our customers do not utilise any cancellation allowances set forth in their MLAs and (iv) our customers do not terminate MLAs early for any reason. The following tables provide the Group’s contracted revenue from 2019 through 2022 on a country-by-country basis and an illustration of our total contracted revenue attributable to our key customers: (US$’000s) Tanzania DRC Congo B Ghana Total (US$’000s) Africa’s Big-Five MNOs Other Total 2019 2020 2021 2022 159,397 150,145 22,834 37,371 159,345 157,721 21,875 36,714 158,969 157,669 17,059 34,704 155,987 155,846 16,954 30,478 369,747 375,655 368,401 359,265 Total Committed Revenues 2,505,980 574,891 3,080,871 Percentage of Total Committed Revenues 81% 19% 100% Liquidity and Capital Resources We manage our financing structure and cash flow requirements based on our overall strategy and objectives, deploying financial and other resources related to those objectives. We manage liquidity risk by maintaining adequate reserves and banking facilities and by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Funding decisions are made based upon a number of internal and external factors, including required amounts and the timing of outflows, the internal and external availability of funds, the costs of financing and other strategic objectives. Our primary sources of liquidity have historically been cash from operations, borrowings under our debt facilities and equity issuances. We have previously sought to finance the costs of developing and expanding our business mainly at the operating level on a country-by-country basis. Consolidated Statement of Cash Flow Data (US$’000s) Cash Flows from Operating Activities Loss for the year before taxation Net cash generated from operating activities Net cash used in investing activities Net cash generated from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents, beginning of year Foreign exchange on translation Cash and cash equivalents, end of year Year Ended 31 December 2018 2017 (119,578) 60,943 (105,069) 14,578 (29,548) 119,700 (1,165) (104,227) 57,572 (169,615) 97,870 (14,173) 133,737 136 88,987 119,700 As at 31 December, 2018 we had US$89.0 million of cash and cash equivalents. Net cash generated from operating activities increased from US$57.6 million during the year ended 31 December, 2017 to US$60.9 million during the year ended 31 December, 2018. The increase in net cash generated from operating activities was primarily driven by an improvement in operating profit, and lower cash outflows as a result of working capital changes, offset by an increase in exceptional costs paid between the years. Net cash used in investing activities decreased from US$169.6 million during the year ended 31 December, 2017 to US$105.0 million during the year ended 31 December, 2018. The decrease in net cash used in investing activities between the years was mainly the result of a lower volume property, plant and equipment purchasing in the year ended 31 December, 2018 compared to the prior year. Helios Towers | Annual Report 2018 39 OverviewFinancial StatementsGovernance ReportStrategic Report Detailed financial review Continued Consolidated Statements of Cash Flows Data (continued) Net cash generated by financing activities decreased from US$97.9 million during the year ended 31 December, 2017 to US$14.6 million during the year ended 31 December, 2018. The decrease in net cash generated by financing activities between the years was primarily due to cash generated from the bond issuance in March 2017 Capital expenditure The following table shows our capital expenditures incurred by category during the years presented: (US$millions) Acquisition Growth Upgrade Maintenance Corporate Total Year Ended 31 December 2018 2.2 78.1 22.3 13.0 3.4 % of Total Capex 1.9% 65.6% 18.7% 10.9% 2.9% 2017 18.7 77.8 52.0 19.8 2.4 % of Total Capex 11.0% 45.6% 30.4% 11.6% 1.4% 119.0 100.0% 170.7 100.0% The decrease in acquisition costs in the year ended 31 December, 2018, are due to the prior year announcement of the Zantel acquisition in July 2017, which completed the acquisition of 101 sites and thus drove prior year expenditure. Upgrade capital expenditure has decreased in 2018 due to prior year investment levels which did not reocurr in 2018. Maintenance capital expenditure has also decreased in 2018, however we continue to carry out periodic refurbishments and replace parts and equipment to keep our sites in service. Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements. Indebtedness As of 31 December, 2017 and 31 December, 2018 the Group’s outstanding loans and borrowings, excluding lease liabilities, were US$628.0 million and US$598.4 million, respectively. On 22 October 2018, HTA Group Ltd, a wholly owned subsidiary of the Group, signed a US$100 million term loan facility agreement at 31 December 2018, US$25.0 million was drawn. 40 Helios Towers | Annual Report 2018 Strategic reportRisk management Risk appetite The Group defines risk appetite as the amount of risk that the business is prepared to take in order to deliver safe, effective working practices as well as maintaining and growing its business. The Group dedicates resources and focus to understanding and ensuring risk is identified, assessed, managed and monitored. Controls and mitigating actions are designed as appropriate to reflect the risk appetite in each instance. Risk governance Risk management is integral to the Group’s strategy and to the achievement of its long-term goals. The Group’s continued success as an organisation depends on its ability to identify and pursue the opportunities generated by its business and the markets in which it operates. The Board has overall responsibility for risk management, compliance and internal controls, and is supported by the Audit and Ethics Committee (the “Committee”). The Committee, under delegation from the Board, monitors the nature and extent of risk exposure against the Group’s risk appetite. The Committee is responsible for identifying, mitigating and managing risk, as well as setting the risk appetite for the business with advice from the executive team. Governance framework Board/Audit and Ethics Committee Executive team 1st line of defence Owns and manages risks and implements/operates business controls 2nd line of defence Oversight of risk and control compliance 3rd line of defence Independent assurance Who is responsible • Operational staff/management Who is responsible • Compliance/functional teams Who is responsible • Internal Audit Activity/controls • Policies and procedures • Internal controls • Planning, budgeting/forecasting processes • Delegation of authority matrix • Business workﬂows/IT systems controls • Personal objectives and incentives Activity/controls • SHEQ • Regulatory compliance • Management/Board reporting and review of KPIs and ﬁnancial performance • Corporate policies and Group functions oversight Activity/controls • Internal Audit risk assessment • Approved Internal Audit plan • Internal Audit reporting line to Audit and Ethics Committee Helios Towers | Annual Report 2018 41 Financial StatementsGovernance ReportStrategic ReportOverviewRisks related to the Group and our business Principal business risks Summarised below are the key risks, not in order of significance, identified which could have a material impact on the Group. The principal risk summaries are therefore supported by a more detailed risk management process. Risk status Risk description Impacts Risk mitigation No change No change 1. Major quality failure or breach of contract The Group’s reputation and profitability could be damaged if the Group fails to meet its customers’ operational specifications, quality standards or delivery schedules. A substantial portion of Group revenues is generated from a limited number of large customers. The loss of any of these customers would materially affect the Group’s finances and growth prospects. Many of the Group’s customer tower contracts contain liquidated damage provisions, which may require the Group to make unanticipated and potentially significant payments to its customers. 2. Non compliance with various laws and regulations such as: i) Health, safety and environmental laws ii) Anti-bribery and corruption provisions Non-compliance with applicable laws and regulations may lead to substantial fines and penalties, reputational damage and adverse effects on future growth prospects. Sudden and frequent changes in laws and regulations, their interpretation or application and enforcement, both locally and internationally, may require the Group to modify its existing business practices, incur increased costs and subject it to potential additional liabilities. Reputational • Continued skills development and training Financial programmes for the project and operational delivery team; • Detailed and defined project scoping and life cycle management through project delivery and transfer to ongoing operations; • Contract and dispute management processes in place; • Continuous monitoring and management of customer relationships; • Use of long-term contracting with minimal termination rights. Compliance • Constant monitoring of potential changes to laws Financial Reputational and regulatory requirements; • In-person training on Health, Safety and Environmental matters provided to employees and relevant third party contractors; • Enhanced compliance and related policies implemented in 2018 including specific details covering: Anti-Bribery and Corruption, Facilitation of Tax Evasion, Anti-Money Laundering; • Compliance monitoring activities and periodic reporting requirements introduced; • Ongoing engagement with external lawyers and consultants and regulatory authorities, as necessary, to identify and assess changes in the regulatory environment; • New Third Party Code of Conduct introduced and communicated; • Launch of Third Party Monitoring reviews. No Change No change 3. Economic and political instability A slowdown in the growth of, or a reduction in demand for, wireless communication services could adversely affect the demand for communication sites and tower space and could have a material adverse effect on the Group’s financial condition and results of operations. There are significant risks related to political instability, security, ethnic, religious and regional tensions in each geography where the Group has operations. 4. Significant exchange rate movements Fluctuations in or devaluations of local market currencies where the Group operates could have a significant and negative financial impact on the Group’s business, financial condition and results. Such impacts may also result from any adverse effects such movements have on Group third party customers and strategic suppliers. Operational • Ongoing market analysis and business Financial intelligence gathering activities; • Market share growth strategy in place; • Close monitoring of any potential risks that may affect operations; • Business continuity and contingency plans in place to respond to any emergency situations. Financial • USD and EUR pegged contracts; • “Natural” hedge of local currencies (revenue vs. opex); • Monthly review of exchange rate differences. 42 Helios Towers | Annual Report 2018 Strategic reportRisk status Risk description Impacts Risk mitigation No change No change No change 5. Non-compliance with licence requirements The Group may not always operate with the necessary required approvals and licences for some of its tower sites, particularly in the case of existing tower portfolios acquired from a third party. Vagueness, uncertainty and changes in interpretation of regulatory requirements are frequent and often without warning. As a result, the Group may be subject to potential reprimands, warnings, fines and penalties for non-compliance with the relevant licensing and approval requirements. 6. Loss of key personnel The Group’s successful operational activities and growth is closely linked to the knowledge and experience of key members of senior management and highly skilled technical employees. The loss of any such personnel, or the failure to attract, recruit and retain equally high calibre professionals, could adversely affect the Group’s operations, financial condition and strategic growth prospects. 7. Technology risk Advances in technology that enhance the efficiency of wireless networks and potential active sharing of wireless spectrum may significantly reduce or negate the need for tower-based infrastructure or services. This could reduce the need for telecommunications operators to add more tower-based antenna equipment at certain tower sites, leading to a potential decline in tenants, service needs and decreasing revenue streams. Examples of such new technologies may include spectrally efficient technologies which could potentially relieve certain network capacity problems or complementary voice over internet protocol access technologies that could be used to offload a portion of subscriber traffic away from the traditional tower-based networks. No change 8. Failure to remain competitive Competition in, or consolidation of, the telecommunications tower industry may create pricing pressures that materially and adversely affect the Group. Operational • Inventory of required licences and permits maintained for each operating company; • Compliance registers maintained with any potential non-conformities identified by relevant government authority with a timetable for rectification; • Periodic engagement with external lawyers and advisors and participation in industry groups; • Active and ongoing engagement with relevant regulatory authorities to proactively identify, assess and manage actual and potential regulation changes. People • Talent identification and succession planning exist for key roles; • Competitive benchmarked performance-related remuneration plans; • Staff development/support plans. Strategic • Strategic long-term planning; • Business intelligence; • Exploring alternatives e.g. solar power technologies; • Continuously improving product offering to enable adaptation to new wireless technologies; • Applying for new licences to provision active infrastructure services in certain markets. Financial • Key Performance Indicator (“KPI”) monitoring and benchmarking against competitors; • Total cost of ownership (“TCO”) analysis for MNOs to run towers; • Fair pricing structure; • Business intelligence and review of competitors’ activities; • Strong tendering team to ensure high win/ retention rate; • Continuous capex investment ensures that the Group has sufficient capacity. New 9. Failure to integrate new lines of business in new markets Multiple risks exist with entry into new markets and new lines of business. Failure to successfully manage and integrate operations, resources and technology could have material adverse implications for the Group’s overall growth strategy and negatively impact its financial position and organisation culture. Strategic Financial Operational • Pre-acquisition due diligence conducted with the assistance of external advisors with specific geographic and industry expertise; • Ongoing monitoring activities post-acquisition/ agreement; • Detailed management, operations and technology integration plan; • Ongoing measurement of performance vs. plan and Group strategic objectives. Helios Towers | Annual Report 2018 43 OverviewFinancial StatementsGovernance ReportStrategic ReportBoard of Directors The Company’s Board of Directors (the “Board of Directors”) consists of 13 members. The shareholders shall have the right to remove any of their respective Directors appointed pursuant to our shareholders’ agreement, with or without cause, by written notice to the Company. The duties and authority of each member of the Board of Directors are regulated by our Articles of Association and shareholders’ agreement. The Board of Directors is currently comprised of the following Directors: Name Kash Pandya Anja Blumert Vishma Boyjonauth Richard Byrne Joshua Ho-Walker Temitope Lawani Nelson Oliveira Umberto Pisoni Simon Pitcher Simon Poole Carlos Reyes Xavier Rocoplan David Wassong Age 56 41 39 61 34 48 56 53 46 52 47 44 48 Position Director & Chief Executive Officer Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director The business address of each of the members of the Board of Directors is Level 3, Alexander House, 35 Cybercity, Ebene, Mauritius. The Board of Directors has strategic control and decision- making authority over the business of the Group. 44 Helios Towers | Annual Report 2018 Kash Pandya has been a Director of the Company since August 2015. Kash arrived as Chief Executive Officer of Helios Towers following eight years with Aggreko plc, where he sat on the Board, running the European Business for three years. He was also Managing Director of Aggreko International for five years, overseeing a doubling of their international business. He began his career with an engineering apprenticeship, and went on to complete a Bachelor’s degree in Technology Engineering and a Master’s in Manufacturing. In 1989, he started at Jaguar before moving to roles within General Electric, Caradon and then APW, where he led all operations outside the United States. In 2004, he became the CEO of Johnston Group, leaving the business on its sale to Ennstone plc. Anja Blumert has been a Director of the Company since October 2015. Ms. Blumert has been head of M&A at Millicom International Cellular SA (“Millicom”) since 2013. From 2009 to 2013, Ms. Blumert was an Independent Strategy and M&A Consultant at Montagu Partners. Prior to this, she was an Investment Professional at Warburg Pincus International covering the Central and Eastern Europe region across all sectors and Western Europe for the TMT sector where she was responsible for the assessment of investment opportunities in private and public companies. Ms. Blumert holds a degree in Finance and Marketing and a Master’s degree in Business Studies from Humboldt University of Berlin. Vishma Boyjonauth has been a Director of the Company since August 2013. Ms. Boyjonauth joined Intercontinental Trust Limited in 2004 and she is currently a Manager in the Corporate Services Department. She leads a team in the Corporate Services Department and oversees operations including the incorporation of companies, advising on company structures, regulatory matters and the corporate administration of companies for both domestic and global business companies in Mauritius. Ms. Boyjonauth graduated from the University of Mauritius with a BSc (Hons) in Economics. Richard Byrne has been a Director of the Company since December 2010. Mr. Byrne co-founded TowerCo in 2004 and served as President and Chief Executive Officer and a member of the Board of Directors from its beginning until his retirement in December 2018. Prior to that, he served as President of the Tower Division of SpectraSite Communications, which grew from 125 towers to more than 8,000 during his tenure. Mr. Byrne served as National Director of Business Development at Nextel Communications Inc. and was responsible for bringing Governance ReportUmberto Pisoni has been a Director of the Company since July 2018. Mr. Pisoni has been global portfolio head of the TMT group at IFC since 2015. Previously, Mr. Pisoni was the global portfolio head of the private equity group at IFC, an investment officer in the TMT group, and also worked in the M&A department at Cookson Group Plc. Umberto holds a BS in Financial and Monetary Economics from Bocconi University and an MBA from the MIT Sloan School of Management. Simon David Pitcher has been a Director of the Company since December 2013. Mr. Pitcher is responsible for Private Investments at J. Rothschild Capital Management Limited (“JRCM”). JRCM is the principal subsidiary of RIT Capital Partners plc. Previously, Mr. Pitcher was a Director at Standard Bank Private Equity, a Director at Blackwood Capital Partners in Sydney and an Investment Director at Hermes Private Equity. He qualified as a Chartered Accountant with PricewaterhouseCoopers. Simon Poole has been a Director of the Company since February 2012. From 2009 to 2011, Mr. Poole acted as Group CFO for Intela Global Ltd where his responsibilities included managing investor relations and the development of group strategy. Prior to this, Mr. Poole held various roles at Celtel including as Interim Group Financial Controller of Celtel International, Chief Financial Officer of Celtel DRC and Finance Director of Celtel Burkina Faso. Mr. Poole holds a BSc in Geography from Exeter University and is a qualified Chartered Accountant. the industry’s first major portfolio of wireless carrier towers to market. Mr. Byrne started his wireless career performing site acquisitions for AT&T Wireless (then McCaw Cellular) in the New York Metropolitan Trading Area. Joshua Ho-Walker has been a Director of the Company since January 2019. Mr. Ho-Walker is a Principal at Strategic Capital Investment Partners, LP, which was formed in October 2018 from the spin-out of the Strategic Investments Group from Soros Fund Management LLC. Mr. Ho-Walker joined Soros in August 2008 and previously worked at Merrill Lynch. He graduated magna cum laude from the Leonard N. Stern School of Business at New York University with a B.S. in Finance and Economics. Temitope Lawani has been a Director of the Company since February 2010. Mr. Lawani, a Nigerian national, is a co-founder and Managing Partner of Helios Investment Partners and has more than 20 years of principal investment experience. Prior to forming Helios, Mr. Lawani was a Principal in the San Francisco and London offices of TPG Capital, a global private equity firm. At TPG, Mr. Lawani had a lead role in the execution of over $10 billion in closed venture capital and leveraged buy-out investments, including the acquisitions of Burger King Corp., Debenhams plc, J. Crew Group and Scottish & Newcastle Retail. Mr. Lawani began his career as a Mergers & Acquisitions and Corporate Development Analyst at the Walt Disney Company. Mr. Lawani received a BS in Chemical Engineering from the Massachusetts Institute of Technology, a Juris Doctorate (cum laude) from Harvard Law School and an MBA from Harvard Business School. He is fluent in Yoruba, a West African language. Nelson Oliveira has been a Director of the Company since May 2016. Mr. Oliveira has been Managing Director, General Counsel and Chief Compliance Officer at Albright Capital Management LLC (“Albright”) since March 2007. During this time, he has been responsible for legal and regulatory aspects of Albright’s operations as a registered investment adviser with broad emerging markets mandates, including legal structuring and risk management of all private investment transactions and all regulatory aspects of fundraising. Prior to this, Mr. Oliveira was Deputy General Counsel at Darby Overseas, Ltd. (a subsidiary of Franklin Resources, Inc.) from March 2002 until March 2007, where he was responsible for overseeing and advising on legal aspects of mezzanine debt and quasi-equity investment transactions in Latin America, Asia and Eastern Europe. Mr. Oliveira holds a Juris Doctorate (cum laude) from Boston College Law School. Helios Towers | Annual Report 2018 45 Financial StatementsGovernance ReportStrategic ReportOverviewDavid Wassong has been a Director of the Company since January 2010. Mr. Wassong is the Co-Head of Strategic Capital Investment Partners, LP which commenced operations on 1 October 2018 when it spun out from Soros Fund Management, LLC. Prior to the spin-out, Mr. Wassong was a Co-Head of the Strategic Investments Group at SFM since 2005 and was responsible for overseeing SIG’s investments in private equity, real estate, infrastructure, growth equity, venture capital, and private equity and venture capital funds. He and his team currently manage a global portfolio of direct private equity investments. Prior to joining Soros Private Equity, Mr. Wassong was Vice President at Lauder Gaspar Ventures, LLC. He started his career in finance as an analyst and then an associate in the investment banking group of Schroder Wertheim & Co., Inc. Mr. Wassong received an MBA from the Wharton School at the University of Pennsylvania and his bachelor’s degree from the University of Pennsylvania. Board of Directors Continued Carlos Reyes has been a Director of the Company since May 2018. Mr. Reyes has been Principal, IFC African, Latin American & Caribbean Fund (“ALAC”) since 2011, and is now the Head of Africa Funds. Prior to joining AMC in 2011, Carlos held several senior roles at BP including Strategy Advisor CEO’s Office and Director E&P for the M&A Group. He has previously worked as an analyst at the World Bank and also served as a consultant to several energy multinationals in Spain. He is also a member of the ALAC Fund and IFC China Mexico Fund investment committees at IFC Asset Management Company. Mr. Reyes holds a BA in Economics from the University of Barcelona, an MBA from the Yale University School of Management, and an MA in International Public Policy from George Mason University. Xavier Rocoplan has been a Director of the Company since October 2015. Mr. Rocoplan has been the Chief Technology and Information Officer (“CTO”) at Millicom since December 2012 and has been its Executive Vice President of Technical since April 2012. In 2002, Mr. Rocoplan was CTO for Vietnam and then became CTO for the South East Asian cluster (Cambodia, Laos and Vietnam). In 2004 he was appointed the CEO of Paktel in Pakistan, a position he held until 2007. During this time, he launched Paktel’s GSM operations and led the process that concluded with the disposal of the business in 2007. After Millicom’s exit from Asia, Mr. Rocoplan was appointed to head the New Corporate Business development unit where he managed the Tower Assets Monetisation programme which led to the creation of tower companies in Ghana, Tanzania, DRC and Colombia. In 2012, he was made Chief Global Networks Officer before being appointed Millicom’s CTO. Mr. Rocoplan holds Master’s degrees from Ecole Nationale Supérieure des Télécommunications de Paris and from Université Paris IX Dauphine. 46 Helios Towers | Annual Report 2018 Governance ReportHelios Towers | Annual Report 2018 47 Governance ReportOverviewFinancial StatementsStrategic ReportExecutive team +100 years’ experience in emerging markets towers and power We have assembled a world-class management team to ensure that Helios Towers is, and remains, a formidable and customer-centric organisation. The team also retains unrivalled relationships with key local constituencies and major wireless operators across the continent. The team combines market-leading, Six Sigma-accredited operational expertise with African telecom network rollout capabilities and global tower management experience. Indeed, collectively, we offer more than 100 years’ experience of towers and power in emerging markets. Kash Pandya Chief Executive Officer Joined 2015 Kash arrived as Chief Executive Officer of Helios Towers following eight years with Aggreko plc, where he sat on the Board, running the European Business for three years. He was also Managing Director of Aggreko International for five years, overseeing a doubling of their international business. He began his career with an engineering apprenticeship, and went on to complete a Bachelor’s degree in Technology Engineering and a Master’s in Manufacturing. In 1989, he started at Jaguar before moving to roles within General Electric, Caradon and then APW, where he led all operations outside the United States. In 2004, he became the CEO of Johnston Group, leaving the business on its sale to Ennstone plc. Tom Greenwood Chief Financial Officer Alex Leigh Chief Commercial Officer Colin Gaston Director of Special Projects Joined 2010 Joined 2012 Joined 2015 Tom was appointed Chief Financial Officer in September 2015, having previously been Helios Towers’ Group Finance Director. He has been instrumental in managing and raising debt and equity for the Group, as well as being a key member of the team for all acquisitions and country set-ups. He is responsible for all finance and IT activities across the Group, and has led the set-up of all financial systems, operations and shared service centre. He joined Helios Towers from PwC, where he was part of the TMT Transaction Services team, focusing on M&A and re- financings, mainly in the telecoms sector. Tom is a Chartered Accountant of the ICAEW (ACA). Alex was appointed to the executive team of Helios Towers in October 2015, and is responsible for commercial, business development and sales activity. Prior to joining the executive team, he served as Business Development Director covering M&A, equity raises and business development. Alex has negotiated many of HT’s major customer agreements and has been a key team member in the capital raising activities of the Group. Before joining Helios Towers, Alex worked at both UBS and Rothschild, primarily advising TMT companies in an M&A capacity. He has been involved in over 20 M&A transactions and eight leveraged finance deals, and has provided strategic advice to large TMT companies across Europe. Colin has been a Director in Helios Towers since joining in 2015. Previously, he held several senior positions at Aggreko from 2000 to 2013, including Operations Director for the International Business, Regional Director for West and Central Africa, and Head of Logistics. He then worked as an independent consultant in Dubai for two years before joining Helios Towers. Colin also has 20 years of international experience in senior management roles with Schlumberger, and is an accredited Lean Six Sigma Black Belt. 48 Helios Towers | Annual Report 2018 Governance Report Roy Cursley Director of Delivery and Technology Helen Ebert Chief Legal Officer Philippe Loridon CEO Helios Towers Tanzania Joined 2015 Joined 2018 Joined 2010 Roy has been at Director of Delivery and Technology at Helios Towers since February 2019 and has been a member of the Executive Management team since 2015. Prior to Helios Towers, Roy was Head of Projects, Planning & Continuous Improvement at Aggreko International. He was responsible for the execution of temporary power projects internationally, primarily in emerging markets. He has a wealth of experience in both South Africa and the East Africa region, and is an accredited Lean Six Sigma Black Belt. Helen brings a wealth of experience to the role of Chief Legal Officer at Helios Towers. She was previously General Counsel at Exterion Media (formerly CBS outdoor) and held senior roles at World Fuel Services, and the Vista Group. She also has extensive experience of working for international law firms in London and Singapore, including Freshfields Bruckhaus Deringer, Slaughter and May, and Linklaters. Helen has significant international M&A, general commercial and compliance experience in EMEA, Asia- Pacific, USA, Russia and Egypt. She is qualified as a solicitor in England and Wales and has a law degree from Cambridge University. Philippe Loridon has been CEO of Helios Towers Tanzania (“HTT”) since January 2015 and joined HTT from Helios Towers DRC, where he had been Chief Executive Officer since December 2011. He previously served as Chief Executive Officer at Equateur Telecom Congo, where he re-launched ETC in the Republic of Congo. Prior to this, Philippe accumulated 20 years’ experience in the telecoms industry with MNOs based in San Marino, Israel and Papua New Guinea. This included 13 years at Hutchison Whampoa, fulfilling senior roles in sales, marketing and business development before first becoming CEO of Hutchison Sri Lanka in 1998, and then Head of Hutchison Telecommunications’ Latin American operations between 2000 and 2002. Léon-Paul Manya Okitanyenda CEO Helios Towers DRC Nick Summers Director of Sustainability and Organisational Development Jeffrey Schumacher CEO Helios Towers Ghana, Congo Brazzaville & South Africa Joined 2011 Joined 2010 Joined 2011 Léon-Paul has been Chief Executive Officer of Helios Towers DRC since January 2015, having previously been Network Operations Director since February 2011. He has over 15 years of experience in the telecommunications industry. Prior to joining the Company, Léon-Paul worked as a Contract Execution Manager at Ericsson; Country Field Manager for MER Telecom; Operations Manager for Venture; and as Logistics Manager at Plessey. He is from DRC and holds a Master’s degree in Economics and Mathematics. Nick has been Director of Sustainability and Organisational Development at Helios Towers since January 2019 and has been a member of the executive management team since 2015. He joined Helios Towers in 2010 following nine years with Vodafone, both in the United Kingdom and internationally. His final role at Vodafone was National Head of RAN Deployment for Vodafone Ghana (previously the state-owned Ghana Telecom). At Helios Towers, Nick has oversight of the implementation of the Group’s sustainability strategy and is responsible for Group human resources; Group health; safety, environmental and quality management; and Group ethics and compliance. Jeffrey has been CEO of Helios Towers Ghana and Helios Towers Congo Brazzaville since 2015 and 2016, respectively. He was also appointed CEO of Helios Towers South Africa in 2019. He has held various senior positions during the set-up, launch and growth phases at subsidiaries in Tanzania, DRC and Chad, where he was Managing Director. Prior to Helios Towers, Jeffrey was an investment professional at Soros Fund Management LLC, where he had been actively involved with the Company since its formation in 2009. He holds a BS in Mechanical Engineering (magna cum laude) from Northwestern University in the United States. Helios Towers | Annual Report 2018 49 Financial StatementsGovernance ReportStrategic ReportOverviewBoard committees Corporate governance Our corporate governance framework provides for checks and balances while allowing our management flexibility for prompt decision-making in the ordinary course of business. The Directors have implemented a corporate governance framework that they consider appropriate for the size and current ownership structure of the Group. Remuneration Committee The members of the Remuneration Committee are appointed by, and act at the discretion of, the Board of Directors. The Remuneration Committee consists of a minimum of three members. The current members of the Remuneration Committee are Richard Byrne, David Wassong and Nelson Oliveira, who is chairman of the committee. The Remuneration Committee meets on a quarterly basis. The Remuneration Committee is responsible for approving key performance indicators for our business and evaluating senior executives’ compensation plans, policies and programmes. Some of the specific duties of the Remuneration Committee include the following: • to annually review and approve annual base salaries for employees of each member of the Group; • to make recommendations with respect to incentive compensation plans; and • to make regular reports to the Board of Directors on the status of outstanding compensation issues. Budget Committee The members of the Budget Committee are appointed by, and act at the discretion of, the Board of Directors. The Budget Committee consists of a minimum of three members. The current members of the Budget Committee are Kash Pandya, David Wassong and Simon Poole, who is chairman of the committee. The Budget Committee meets on a quarterly basis. Some of the specific duties of the Budget Committee include the following: • to work with the Group management teams on the annual Internal Budget Review and stress test detailed assumptions, projections and expectations to ensure that management’s expectations are reasonable and achievable; and • to report to the Board of Directors on the process and recommend approval of the annual Budget, highlighting key risks and opportunities considered. Audit and Ethics Committee The Audit and Ethics Committee is appointed by the Board of Directors and consists of a minimum of three members. The current members of the Audit and Ethics Committee are Nelson Oliveira, Simon Poole, Mohsin Sohani and Simon Pitcher, who is chairman of the committee. The Audit and Ethics Committee meets on a quarterly basis and holds a meeting with the external auditor at least once a year without the presence of any executive member. The role of the Audit and Ethics Committee is to: (i) be responsible to the Board of Directors for the oversight of financial accounting and reporting, internal controls, risk assessment and management, and ethics and compliance, including the integrity of the Group’s procurement process; (ii) be directly responsible for the appointment, compensation and oversight of the independent auditor, including the resolution of any disagreements with management; and (iii) endeavour to work with management and the independent auditor in a spirit of mutual respect and cooperation. Some of the specific duties of the Audit and Ethics Committee include the following: • to oversee systems, processes, internal controls and procedures, and compliance with the ethical standards adopted by the Group; • to oversee the independent auditor’s qualifications, independence and performance; and • to assess compliance with the Group’s procurement policy. 50 Helios Towers | Annual Report 2018 Governance ReportConflicts of interest Except as disclosed in these financial statements, there are no potential conflicts of interest between any duties of the members of the Group’s administrative, management or supervisory bodies to the Group and their private interests and/or other duties. Principal shareholders The following table sets forth certain information, as of 31 December, 2018, with respect to the ownership of the Company’s shares by each person who, according to the Company’s Shareholders Register, owned more than 5% of the Company’s shares: Shareholder Millicom Holding, B.V. Quantum Strategic Partners, Ltd. Lath Holdings, Ltd ACM Africa Holdings, LP RIT Capital Partners Plc IFC African Latin American Caribbean Fund, LP Percentage directly held 22.83% 21.80% 16.43% 11.61% 7.18% 6.11% The remaining 14.04% of the Company is owned by minority shareholders, none of which owns more than 5% of the Company’s shares. The Company’s leading shareholders are financial investors who invested in the Company in 2009, except for Millicom, who invested in the Group in 2010. Helios Towers | Annual Report 2018 51 Financial StatementsGovernance ReportStrategic ReportOverviewGlossary We have prepared the Annual Report using a number of conventions, which you should consider when reading information contained herein as follows: All references to “we”, “us”, “our”, “HT Group”, our “Group” and the “Group” are references to Helios Towers, Ltd (the “Company”) and its subsidiaries taken as a whole. “colocation” means the sharing of tower space by multiple customers or technologies on the same tower, equal to the sum of standard colocation tenants and amendment colocation tenants. “colocation tenant” means each additional tenant on a tower in addition to the primary anchor tenant. “3G” means the third generation cellular telecommunications networks that allow simultaneous use of voice and data services, and provide high-speed data access using a range of technologies. “4G” or “4G LTE” means the fourth generation cellular telecommunications networks that allow simultaneous use of voice and data services, and provide high-speed data access using a range of technologies (these speeds exceed those available for 3G). “Adjusted EBITDA” as loss for the period, adjusted for loss for the period from discontinued operations, additional tax, income tax, finance costs, other gains and losses, investment income, loss on disposal of property, plant and equipment, amortisation and impairment of intangible assets, depreciation and impairment of property, plant and equipment, deal costs relating to unsuccessful tower acquisition transactions or successful tower acquisition transactions that cannot be capitalised, and exceptional items. Exceptional items are material items that are considered exceptional in nature by management by virtue of their size and/or incidence. “Adjusted EBITDA margin” as Adjusted EBITDA divided by revenue. “Airtel” means Bharti Airtel International. “amendment colocation tenant” means an existing customer on a site (anchor tenant or standard colocation tenant) adding or modifying equipment, taking up additional vertical space, wind load capacity and/or power consumption, which leads to additional revenue billing under the menu pricing of an existing MLA agreement. The Group calculates amendment colocations using the additional revenue generated by the amendment on a weighted basis as compared to the market average rate for a standard tenancy in the month the amendment is added. “anchor tenant” means the primary customer occupying each tower. “average remaining life” of certain agreements means the average of the periods through the expiration of the term under all such agreements. “Company” means Helios Towers, Ltd. “Congo Brazzaville” means the Republic of Congo, Congo Brazzaville or Congo. “contracted revenue” means revenue contracted under our site agreements under all total tenancies, assuming no escalation of maintenance fees and no renewal upon the expiration of the current term. “corporate capital expenditure” is primarily for furniture, fixtures and equipment. “DRC” means Democratic Republic of Congo. “EUR” or “€” means the currency introduced at the start of the third stage of the European Economic and Monetary Union pursuant to Article 123 of the treaty establishing the European Community, as amended. “G7 countries” means each of the United States, Canada, France, Germany, Italy, Japan and the United Kingdom. “Ghana” means the Republic of Ghana. “gross debt” as our total borrowings (non-current loans and current loans) excluding unamortised loan issue costs. “gross margin” means gross profit, adding site and warehouse depreciation, divided by revenue. “growth capital expenditure” comprises structural, refurbishment and consolidation activities carried out on selected acquired sites. “GSM” means Global System for Mobile Communication, a standard for digital mobile communications. “Guarantors” means the Company, HT Holdings, Ltd., HT Congo Brazzaville Holdco Limited, Helios Towers DRC S.A.R.L., Helios Towers Tanzania Limited, Helios Towers Congo Brazzaville SASU, HT DRC Infraco S.A.R.L., HTT Infraco Limited, Towers NL Coöperatief U.A., McTam International 1 B.V., Helios Towers Ghana Limited, HTG Managed Services Limited and McRory Investment B.V. “Helios Towers DRC” means Helios Towers DRC S.A.R.L. “Helios Towers Ghana” means Helios Towers Ghana Limited. “build-to-suit/BTS” means sites constructed by our Group on order by an MNO. “Helios Towers South Africa” means Helios Towers South Africa Limited. “CAGR” means compound annual growth rate. “capital expenditures” means the additions of property, plant and equipment. “CODM” means Chief Operating Decision Maker. “Helios Towers Tanzania” means Helios Towers Tanzania Limited. “HT Congo Brazzaville” means HT Congo Brazzaville Holdco Limited. “IBS” means in-building cellular enhancement. “IFRS” means International Financial Reporting Standards. “ISA” means individual site agreement. 52 Helios Towers | Annual Report 2018 Governance Report“telecommunications operator” means a company licensed by the government to provide voice and data communications services in the countries in which we operate. “tenancy” means a space leased for installation of a base transmission site and associated antennaes. “tenancy ratio” means the total number of tenancies divided by the total number of our towers as of a given date and represents the average number of tenants per site within a portfolio. “Tigo” refers to one or more subsidiaries of Millicom that operate under the commercial brand “Tigo”. “total colocations” means total colocation tenants. “total sites” means total live towers, IBS sites or sites with customer equipment installed on third-party infrastructure that are owned and/or managed by the Company with each reported site having at least one active customer tenancy as of a given date. “total tenancies” means the individual tower occupancies by each customer as of a given date. “tower sites” means ground-based towers and rooftop towers and installations constructed and owned by us on real property (including a rooftop) that is generally owned or leased by us. “upgrade capital expenditure” relates to (i) installation of colocation tenants and (ii) investments in power management solutions. “US dollars” or “$” refers to the lawful currency of the United States of America. “United States” or “US” means the United States of America. “Vodacom” means Vodacom Group Limited. “Vodacom Tanzania” means Vodacom Tanzania Ltd. “Zantel” means Zanzibar Telecom PLC. “LTE” means Long-Term Evolution, designed to increase the capacity and speed of mobile telephone networks according to the standard developed by the 3GPP consortium, frequently referred to as “4G” or “4th generation”. Some of the key assumptions of the system are: (i) data transmission at speeds faster than 3G; (ii) ready for new service types; (iii) architecture simplified in comparison to 3G; and (iv) provisions for open interfaces. “maintenance capital expenditures” as capital expenditures for periodic refurbishments and replacement of parts and equipment to keep existing sites in service. “maintained sites” refers to sites that are maintained by the Company on behalf of a telecommunications operator but which are not marketed by the Company to other telecommunications operators for colocation (and in respect of which the Company has no right to market). “managed sites” refers to sites that the Company currently manages but does not own due to either: (i) certain conditions for transfer under the relevant acquisition documentation, ground lease and/or law not yet being satisfied; or (ii) the site being subject to an agreement with the relevant MNO under which the MNO retains ownership and outsources management and marketing to the Company. “Mauritius” means the Republic of Mauritius. “Millicom” means Millicom International Cellular SA. “mobile penetration” means the measure of the amount of active mobile phone subscriptions compared to the total market for active mobile phones. “MLA” means master lease agreement. “MNO” means mobile network operator. “MTN” means MTN Group Ltd. “near investment grade” means one notch below investment grade. “net debt” means gross debt less cash and cash equivalents. “Orange” means Orange S.A. “PoS” means point of service. “SHEQ” means Safety, Health, Environment and Quality. “site acquisition” means a combination of MLAs, which provide the commercial terms governing the provision of tower space, and individual ISA, which act as an appendix to the relevant MLA, and include site-specific terms for each site. “site agreement” means the MLA and ISA executed by us with our customers, which act as an appendix to the relevant MLA and includes certain site-specific information (for example, location and any grandfathered equipment). “SLA” means service-level agreement. “standard colocation tenant” means a customer occupying tower space under a standard tenancy lease rate and configuration with defined limits in terms of the vertical space occupied, the wind load and power consumption. “Tanzania” means the United Republic of Tanzania. Helios Towers | Annual Report 2018 53 Financial StatementsGovernance ReportStrategic ReportOverviewDirectors’ report The Directors present their report and audited financial statements for the year ended 31 December 2018. Principal activity and review The principal activity of the Group during the year was the building and maintaining of telecommunications towers to provide space on those towers to wireless telecommunications service and associated service providers in Africa. Dividends During the financial year ended 31 December 2018, the Directors did not recommend the payment of a dividend (2017: US$ nil). The Directors who are members of the Board at the time of approving the Directors’ report and Operating and Financial Review are listed on page 44. Auditor So far as each Director is aware, there is no relevant information of which the Group’s external auditor is unaware. Each Director has taken all steps that ought to have been taken as a Director in order to be aware of any relevant audit information and to establish that Deloitte Mauritius is aware of that information. Deloitte Mauritius has indicated its willingness to continue in office and will be reappointed at the next Annual Meeting. Approved by the Board on 25 February 2019. Kash Pandya The Company was incorporated in the Republic of Mauritius on 9 December 2009 as a Category 2 – Global Business Licence Company. Director appointments and resignations During the year, there were appointments and resignations of Directors as follows: Carlos Reyes Lopez (Appointed 17 May 2018); Umberto Pisoni (Appointed 9 July 2018); Colin Curvey (Resigned 2 August 2018); Waldermar Rafal Szlezak (Resigned 31 January 2019). Results and future prospects A detailed review of the results and future prospects is included in the Operating and Financial Review. Going concern The Directors have considered whether there are any material uncertainties that cast significant doubt on the Group’s ability to continue as a going concern. In order to mitigate the operating, commercial, legal, economic and financial risks to which the Group is exposed, the Directors have put in place a number of controls, reviews and procedures designed to address these risks. The Group’s forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group is able to generate positive cash flows from its operations and meet its liabilities as they fall due. Therefore, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus, they adopt the going concern basis of accounting in preparing the annual financial statements. 54 Helios Towers | Annual Report 2018 Governance ReportDirectors’ responsibilities statement The Directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards (“IFRSs”). International Accounting Standard (“IAS”) 1 requires that financial statements present fairly for each financial period the Group and Company’s financial position, financial performance and cash flows. This requires faithful representation of the effect of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out on the International Accounting Standards Board’s “Framework for the Preparation and Presentation of Financial Statements”. The Directors are also responsible for maintaining an effective system of internal control and risk management. In virtually all situations, a fair presentation will be achieved by complying with all applicable IFRSs. In preparing these financial statements, the Directors are also required to: • select suitable accounting policies and then apply them consistently; • present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; • make judgements and accounting estimates that are reasonable and prudent; • provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group and Company’s financial position and financial performance; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in business. The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the financial statements comply with IFRS. They are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Helios Towers | Annual Report 2018 55 Financial StatementsGovernance ReportStrategic ReportOverviewIndependent auditor’s report to the shareholders of Helios Towers, Ltd Report on the audit of the consolidated and separate financial statements Opinion We have audited the consolidated and separate financial statements of Helios Towers, Ltd. (the “Company”) and its subsidiaries (collectively referred to as the “Group”) set out on pages 58 to 93, which comprise the consolidated and separate statement of financial position as at 31 December 2018, and the consolidated and separate statement of profit or loss and other comprehensive income, consolidated and separate statement of changes in equity and consolidated and separate statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the accompanying consolidated and separate financial statements give a true and fair view of the financial position of the Group and the Company as at 31 December 2018, and of their consolidated and separate financial performance and consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards (“IFRSs”). Basis for opinion We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our responsibilities under those Standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated and separate financial statements section of our report. We are independent of the Group and the Company in accordance with the ethical requirements of the International Ethics Standards Board for Accountants’ Code of Ethics for professional Accountants (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Other information The Directors are responsible for the other information. The other information comprises of the Overview, Strategic report and Governance report, but does not include the consolidated and separate financial statements and our auditor’s report thereon. Our opinion on the consolidated and separate financial statements does not cover the other information and we do not express any form of assurance or conclusion thereon. In connection with our audit of the consolidated and separate financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated and separate financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. When we read the other reports which are expected to be made available to us after the date of this auditor’s report, if we conclude that there is material misstatement therein, we are required to communicate the matter to the Directors. Responsibilities of Directors for the consolidated and separate financial statements The Directors are responsible for the preparation and fair presentation of the consolidated and separate financial statements in accordance with International Financial Reporting Standards and they are also responsible for such internal control as the Directors determine is necessary to enable the preparation of consolidated an financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated and separate financial statements, the Directors are responsible for assessing the Group’s and the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group and/or the Company or to cease operations, or have no realistic alternative but to do so. The Directors are responsible for overseeing the Group’s and the Company’s financial reporting process. . 56 Helios Towers | Annual Report 2018 Financial StatementsAuditor’s responsibilities for the audit of the consolidated and separate financial statements Our objectives are to obtain reasonable assurance about whether the consolidated and separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated and separate financial statements. As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the consolidated and separate financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Company’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s and the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated and separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group and/or the Company to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the consolidated and separate financial statements, including the disclosures, and whether the consolidated and separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. This report is made solely to the Company’s shareholders, as a body. Our audit work has been undertaken so that we might state to the Company’s shareholders those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s shareholders as a body, for our audit work, for this report, or for the opinions we have formed. Deloitte Chartered Accountants 25 February 2019 L. Yeung Sik Yuen, ACA Licensed by FRC Helios Towers | Annual Report 2018 57 Financial StatementsGovernance ReportStrategic ReportOverview Consolidated Statement of profit or loss For the year ended 31 December 2018 Revenue Cost of sales Gross profit Administrative expenses Loss on disposal of property, plant and equipment Operating profit/(loss) Investment income Other gains and losses Finance costs Loss before tax Tax expenses Loss after tax for the year The notes on pages 67 to 93 form part of these financial statements. Notes 2018 US$’000 2017 US$’000 3 356,049 (255,848) 344,957 (275,651) 100,201 69,306 (91,059) (5,835) (91,261) (2,018) 3,307 (23,973) 951 (16,831) (107,005) 706 21,797 (102,757) (119,578) (104,227) (4,369) (3,207) (123,947) (107,434) 5 8 24 9 10 58 Helios Towers | Annual Report 2018 Financial StatementsConsolidated Statement of other comprehensive income For the year ended 31 December 2018 Other comprehensive loss: Items that may be reclassified subsequently to profit and loss: Exchange differences on translation of foreign operations Total comprehensive loss for the year Loss attributable to: Owners of the Company Non-controlling interest Loss for the year Total comprehensive loss attributable to: Owners of the Company Non-controlling interest Total comprehensive loss for the year The notes on pages 67 to 93 form part of these financial statements. Notes 2018 US$’000 2017 US$’000 (2,214) (1,384) (126,161) (108,818) (123,947) – (92,817) (14,617) (123,947) (107,434) (126,161) – (94,984) (13,834) (126,161) (108,818) Helios Towers | Annual Report 2018 59 Financial StatementsGovernance ReportStrategic ReportOverviewCompany Statement of profit or loss and other comprehensive income For the year ended 31 December 2018 Revenue Cost of sales Gross profit Administrative expenses Operating loss Investment income Finance income/(costs) Loss before tax Tax expenses Loss after tax and total comprehensive loss for the year The notes on pages 67 to 93 form part of these financial statements. Notes 2018 US$’000 2017 US$’000 – – – – – – (42,767) (40,131) (42,767) – 124 (40,131) 132 (677) (42,643) (40,676) – – (42,643) (40,676) 5 8 9 10 60 Helios Towers | Annual Report 2018 Financial StatementsConsolidated Statement of financial position For the year ended 31 December 2018 Non-current assets Intangible assets Property, plant and equipment Right-of-use assets Investments Derivative financial assets Current assets Inventories Trade and other receivables Prepayments Cash and cash equivalents Total assets Equity Issued capital and reserves Share capital Share premium Stated capital Other reserves Minority interest buy-out reserve Translation reserve Accumulated losses Equity attributable to owners Non-controlling interest Total equity Current liabilities Trade and other payables Short-term lease liabilities Minority interest buy-out liability Loans Non-current liabilities Long-term lease liabilities Loans Total liabilities Total equity and liabilities 31 December 2018 US$’000 Notes 31 December 2017 (Restated IFRS 16) US$’000 1 January 2017 (Restated IFRS 16) US$’000 11 12a 12b 13 25 12,406 676,643 103,786 132 7,086 17,961 705,700 104,983 132 23,917 35,556 655,140 102,406 132 1,393 800,053 852,693 794,627 14 15 16 17 10,265 102,250 16,225 88,987 9,538 108,491 23,403 119,700 19,503 126,929 20,466 133,737 217,727 261,132 300,635 1,017,780 1,113,825 1,095,262 18 909,154 186,951 909,154 186,951 909,134 186,795 1,096,105 1,096,105 1,095,929 (12,778) – (81,663) (879,959) (12,778) – (79,449) (752,280) (11,693) (54,429) (77,282) (554,878) 121,705 – 251,598 – 397,647 (36,322) 121,705 251,598 361,325 19 21 20 21 20 149,752 19,559 – 17,254 147,324 20,452 – 17,254 163,857 20,934 57,886 60,516 186,565 185,030 303,193 98,720 610,790 709,510 96,097 581,100 90,111 340,633 677,197 430,744 896,075 862,227 733,937 1,017,780 1,113,825 1,095,262 Approved and authorised for issue by the Board on 25 February 2019 and signed on its behalf by Kash Pandya Simon David Pitcher The notes on pages 67 to 93 form part of these financial statements. Helios Towers | Annual Report 2018 61 Financial StatementsGovernance ReportStrategic ReportOverviewCompany Statement of financial position For the year ended 31 December 2018 Non-current assets Intangible assets Investments Current assets Trade and other receivables Prepayments Cash and cash equivalents Total assets Equity Issued capital and reserves Share capital Share premium Stated capital Other reserves Accumulated losses Total equity Current liabilities Trade and other payables Total liabilities Total equity and liabilities Notes 2018 US$’000 2017 US$’000 11 13 15 16 17 257 430,677 176 430,677 430,934 430,853 494,477 334 4,555 482,802 221 18,314 499,366 501,337 930,300 932,190 18 909,154 186,951 909,154 186,951 1,096,105 1,096,105 (9,835) (164,889) (9,835) (207,532) 878,738 921,381 19 51,562 51,562 10,809 10,809 930,300 932,190 Approved and authorised for issue by the Board on 25 February 2019 and signed on its behalf by Kash Pandya Simon David Pitcher The notes on pages 67 to 93 form part of these financial statements. 62 Helios Towers | Annual Report 2018 Financial StatementsConsolidated Statement of changes in equity For the year ended 31 December 2018 Share capital US$’000 Share premium US$’000 Stated capital US$’000 Other reserves US$’000 Minority interest buy–out reserves US$’000 Translation reserve US$’000 Accumulated losses US$’000 Attributable to the owners of the parent US$’000 Non– controlling interest (NCI) US$’000 Total equity US$’000 Balance at 1 January 2017 (as previously reported) Restatement – IFRS 16(i) 909,134 186,795 1,095,929 (11,693) (54,429) (77,486) (544,355) 407,966 (36,322) 371,644 – – – – – 204 (10,523) (10,319) – (10,319) Balance at 1 January 2017 909,134 186,795 1,095,929 (11,693) (54,429) (77,282) (554,878) 397,647 (36,322) 361,325 (restated) Issue of share capital Share issue costs Acquisition of NCI Premium on acquisition of NCI Minority buy-out reserves Loss for the year Other comprehensive loss Total comprehensive loss for the year 20 – – – – – – – 156 – – – – – – – 176 – – – – – – – – (1,085) – – – – – – – 54,429 – – – Balance at 31 December 2017 909,154 – Effects of transition to IFRS 9 186,951 1,096,105 – – (12,778) – Loss for the year Other comprehensive loss Total comprehensive loss for the year – – – – – – – – – – – – Balance at 31 December 2018 909,154 186,951 1,096,105 (12,778) (i) See note 2. – – – – – – (2,167) – – (36,658) (13,498) (54,429) (92,817) – 176 (1,085) (36,658) (13,498) – (92,817) (2,167) – – 50,156 – – 176 (1,085) 13,498 (13,498) – (14,617) 783 (107,434) (1,384) (2,167) (92,817) (94,984) (13,834) (108,818) (79,449) – (752,280) (3,732) 251,598 (3,732) – (2,214) (123,947) – (123,947) (2,214) (2,214) (123,947) (126,161) (81,663) (879,959) 121,705 – – – – – – 251,598 (3,732) (123,947) (2,214) (126,161) 121,705 – – – – – – – – – Other reserves relate to the costs incurred in issuing equity. These costs include registration and other regulatory fees, amounts paid to legal, accounting and other professional advisors. During the year, the Group transitioned to IFRS 9: Financial Instruments, with the effect of transition shown as at 1 January 2018. More detail is disclosed in note 2. Translation reserve relates to the translation of the financial statements of overseas subsidiaries in to the presentational currency of the consolidated financial statements. Helios Towers | Annual Report 2018 63 Financial StatementsGovernance ReportStrategic ReportOverviewCompany Statement of changes in equity For the year ended 31 December 2018 Share capital US$’000 Share premium US$’000 Stated capital US$’000 Other reserves US$’000 Accumulated losses US$’000 Total equity US$’000 Balance at 1 January 2017 Issue of share capital Loss and total comprehensive loss for the year Balance at 31 December 2017 Loss and total comprehensive loss for the year 909,134 20 – 909,154 – 186,795 1,095,929 176 – 156 – 186,951 1,096,105 – – (9,835) – – (9,835) – (124,213) – (40,676) (164,889) (42,643) 961,881 176 (40,676) 921,381 (42,643) Balance at 31 December 2018 909,154 186,951 1,096,105 (9,835) (207,532) 878,738 Other reserves relates to the costs incurred in issuing equity. These costs include registration and other regulatory fees, amounts paid to legal, accounting and other professional advisors. 64 Helios Towers | Annual Report 2018 Financial StatementsConsolidated Statement of cash flows For the year ended 31 December 2018 Cash flows from operating activities Loss for the year before taxation Adjustments for: Other gains and losses Finance costs Investment income Depreciation and amortisation Loss on disposal of property, plant and equipment Movement in working capital: Increase in inventories Decrease in trade and other receivables (Increase)/decrease in prepayments Decrease in trade and other payables Cash generated from operations Interest paid Tax paid Net cash generated from operating activities Cash flows from investing activities Payments to acquire property, plant and equipment Payments to acquire intangible assets Proceeds on disposal on assets Interest received Net cash used in investing activities Cash flows from financing activities Gross proceeds from issue of equity share capital Payments for buy-back of shares Borrowing drawdowns Loan financing costs Borrowing repayments Repayment of lease liabilities Net cash generated from financing activities Net decrease in cash and cash equivalents Foreign exchange on translation movement Cash and cash equivalents at 1 January Cash and cash equivalents at 31 December Notes 2018 US$’000 2017 US$’000 24 9 8 11, 12 (119,578) (104,227) 16,831 107,005 (951) 141,328 5,835 (1,004) 9,332 (3,841) (21,198) 133,759 (69,875) (2,941) (21,797) 102,757 (706) 148,926 2,018 (2,548) 7,632 5,968 (27,567) 110,456 (51,633) (1,251) 60,943 57,572 (103,000) (3,158) 138 951 (166,711) (3,857) 249 704 (105,069) (169,615) – – 25,000 – – (10,422) 163 (58,556) 600,000 (24,079) (407,983) (11,675) 14,578 97,870 (29,548) (14,173) (1,165) 119,700 136 133,737 88,987 119,700 Helios Towers | Annual Report 2018 65 Financial StatementsGovernance ReportStrategic ReportOverview Company Statement of cash flows For the year ended 31 December 2018 Cash flows from operating activities Loss for the year before taxation Adjustments for: Finance costs Investment income Amortisation Movement in working capital: Decrease in trade and other receivables Decrease in prepayments (Increase)/decrease in trade and other payables Net cash generated from/(used in) operating activities Cash flows from investing activities Payment to acquire intangible asset Net cash used in investing activities Cash flows from financing activities Gross proceeds from issue of equity share capital Net cash generated from financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at 1 January Cash and cash equivalents at 31 December Notes 2018 US$’000 2017 US$’000 9 8 11 (42,643) (40,676) (124) – 89 822 40 28,227 677 (132) 13,210 1,552 3,490 (47,381) (13,589) (69,260) (170) (170) – – (142) (142) 163 163 (13,759) 18,314 (69,239) 87,553 4,555 18,314 66 Helios Towers | Annual Report 2018 Financial Statements Notes to the Financial Statements For the year ended 31 December 2018 1. Statement of compliance and presentation of financial statements Helios Towers, Ltd (the “Company”) is a limited company incorporated and domiciled in the Republic of Mauritius. The Company and entities controlled by the Company (its subsidiaries, together the “Group”) are disclosed in note 13. The Group and the Company’s financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) issued by the International Accounting Standards Board (“IASB”). The Company holds a Category 2 Global Business Licence issued by the Financial Services Commission (“FSC”). The principal accounting policies adopted by the Group and the Company are set out in note 2. 2. Accounting Policies Basis of preparation The financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments that are measured at fair value at the end of each reporting period. The financial statements are presented in United States Dollars (US$). Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group and the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated and separate financial statements is determined on such a basis, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in IAS 2 or value in use in IAS 36. In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows: • Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities; • Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and • Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). The principal accounting policies adopted are set out below. Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. Control is achieved when the Company: • has the power over the investee; • is exposed, or has rights, to variable return from its involvement with the investee; and • has the ability to use its power to affect its returns. The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, the results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date the Company gains control until the date when the Company ceases to control the subsidiary. Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income of the subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with the Group’s accounting policies. All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between the members of the Group are eliminated on consolidation. Helios Towers | Annual Report 2018 67 Financial StatementsGovernance ReportStrategic ReportOverviewNotes to the Financial Statements For the year ended 31 December 2018 (continued) 2. Accounting Policies (continued) Basis of consolidation (continued) Non-controlling interests in subsidiaries are identified separately from the Group’s equity therein. Those interests of non-controlling shareholders that are present ownership interests entitling their holders to a proportionate share of net assets upon liquidation may initially be measured at fair value or at the non-controlling interests’ proportionate share of the fair value of the acquiree’s identifiable net assets. The choice of measurement is made on an acquisition-by-acquisition basis. Other non-controlling interests are initially measured at fair value. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests’ share of subsequent changes in equity. Changes in the Group’s interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. The carrying amount of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to the owners of the Company. Going concern The Group’s business activities, together with factors likely to affect its future development, performance and position are considered by the Directors on an annual basis. In addition, notes 20 and 25 include details of the Group’s treasury activities, long-term funding arrangements, financial instruments and financial risk management activities. The Group has sufficient financial resources which, together with internally generated cash flows, will continue to provide sufficient sources of liquidity to fund its current operations, including its contractual and commercial commitments as set out in note 20. The Directors assess forecasts and make financing and liquidity reviews on a regular basis. The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the financial statements. Changes in accounting policies In the current year, the Group has applied IFRS 9 Financial Instruments (as revised in July 2014) and the related consequential amendments to other IFRS Standards that are effective for an annual period that begins on or after 1 January 2018. The transition provisions of IFRS 9 allow an entity not to restate comparatives. The impact of adoption of IFRS 9 on 1 January 2018 is to increase the Accumulated losses balance from US$741.8 million as previously stated to US$745.5 million. The US$3.7 million increase in Accumulated losses resulted entirely from a change in the measurement attribute of the loss allowance relating to trade receivables. Additionally, the Group adopted consequential amendments to IFRS 7 Financial Instruments: Disclosures, that were applied to the disclosures for 2018. IFRS 9 introduced new requirements for: • the classification and measurement of financial assets and financial liabilities; and • impairment of financial assets Details of these new requirements, as well as their impact on the Group’s consolidated financial statements, are described below. The Group has applied IFRS 9 in accordance with the transition provisions set out in IFRS 9. Classification and measurement of financial assets The date of initial application (i.e. the date on which the Group has assessed its existing financial assets and financial liabilities in terms of the requirements of IFRS 9) is 1 January 2018. Accordingly, the Group has applied the requirements of IFRS 9 to instruments that continue to be recognised as at 1 January 2018 and has not applied the requirements to instruments that have already been derecognised as at 1 January 2018. All recognised financial assets that are within the scope of IFRS 9 are required to be measured subsequently at amortised cost or fair value on the basis of the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. Specifically: • debt instruments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding, are measured subsequently at amortised cost; and • all other debt investments and equity investments are measured subsequently at fair value through profit or loss (FVTPL). 68 Helios Towers | Annual Report 2018 Financial Statements2. Accounting Policies (continued) Changes in accounting policies (continued) The Directors of the Company reviewed and assessed the Group’s existing financial assets as at 1 January 2018 based on the facts and circumstances that existed at that date and concluded that the initial application of IFRS 9 has had the following impact on the Group’s financial assets as regards their classification and measurement: • financial assets classified as held-to-maturity and loans and receivables under IAS 39 that were measured at amortised cost continue to be measured at amortised cost under IFRS 9 as they are held within a business model to collect contractual cash flows and these cash flows consist solely of payments of principal and interest on the principal amount outstanding. None of the other reclassifications of financial assets have had any impact on the Group’s financial position, profit or loss, other comprehensive income or total comprehensive income in either year. Impairment of financial assets In relation to the impairment of financial assets, IFRS 9 requires an expected credit loss model as opposed to an incurred credit loss model under IAS 39. The expected credit loss model requires the Group to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition of the financial assets. In other words, it is no longer necessary for a credit event to have occurred before credit losses are recognised. Specifically, IFRS 9 requires the Group to recognise a loss allowance for expected credit losses on: • Debt investments measured subsequently at amortised cost; and • Trade receivables. In particular, IFRS 9 requires the Group to measure the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses (“ECL”) if the credit risk on that financial instrument has increased significantly since initial recognition, or if the financial instrument is a purchased or originated credit-impaired financial asset. However, if the credit risk on a financial instrument has not increased significantly since initial recognition (except for a purchased or originated credit-impaired financial asset), the Group is required to measure the loss allowance for that financial instrument at an amount equal to 12-months ECL. IFRS 9 also requires a simplified approach for measuring the loss allowance at an amount equal to lifetime ECL for trade receivables, contract assets and lease receivables in certain circumstances. The consequential amendments to IFRS 7 have also resulted in more extensive disclosures about the Group’s exposure to credit risk in the consolidated financial statements. Classification and measurement of financial liabilities A significant change introduced by IFRS 9 in the classification and measurement of financial liabilities relates to the accounting for changes in the fair value of a financial liability designated as at FVTPL attributable to changes in the credit risk of the issuer. Specifically, IFRS 9 requires that the changes in the fair value of the financial liability that is attributable to changes in the credit risk of that liability be presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss, but are instead transferred to retained earnings when the financial liability is derecognised. Previously, under IAS 39, the entire amount of the change in the fair value of the financial liability designated as at FVTPL was presented in profit or loss. There is no impact from this change on the Group consolidated financial statements. There were no financial assets or financial liabilities which the Group had previously designated as at FVTPL under IAS 39 that were subject to reclassification or which the Group has elected to reclassify upon the application of IFRS 9. There were no additional financial assets or financial liabilities which the Group has elected to designate as FVTPL at the date of initial application of IFRS 9. The application of IFRS 9 has had no impact on the consolidated cash flows of the Group. Restatement – IFRS 16 The right-of-use asset balance and related reserves have been restated to reflect a refinement to the underlying IFRS 16 model such that leases are now calculated with reference to the underlying functional currency rather than $USD. Accordingly, the comparative Group statement of financial position and statement of changes in equity line items have been restated as follows: Line item description Right-of-use assets Translation reserve Accumulated losses 31 December 2017 (as previously stated) 31 December 2017 (as restated) 115,302 (79,653) 104,983 (79,449) 1 January 2017 (as previously stated) 112,725 (77,486) 1 January 2017 (as restated) 102,406 (77,282) (741,757) (752,280) (544,355) (554,878) The adjustment has no impact on previously reported Group revenue, gross profit, loss before tax, loss after tax for the year, total comprehensive income or adjusted EBITDA (as defined in note 4). There is no impact on the previously stated Company results. Helios Towers | Annual Report 2018 69 Financial StatementsGovernance ReportStrategic ReportOverviewNotes to the Financial Statements For the year ended 31 December 2018 (continued) 2. Accounting Policies (continued) Revenue recognition In the prior year, the Group applied IFRS 15 Revenue from Contracts with Customers (as amended in April 2016) in advance of its effective date. IFRS 15 introduces a five-step approach to revenue recognition. Far more prescriptive guidance has been added in IFRS 15 to deal with specific scenarios. Details of these new requirements as well as their impact on the Group’s consolidated financial statements are described below. The Group applied IFRS 15 in accordance with the fully retrospective transitional approach without using the practical expedients for completed contracts in IFRS 15.C5(a), and (b), or for modified contracts in IFRS 15.C5(c) or using the expedient in IFRS 15.C3(d) allowing both non-disclosure of the amount of the transaction price allocated to the remaining performance obligations, and an explanation of when it expects to recognise that amount as revenue for all reporting periods presented before the date of initial application. IFRS 15 uses the terms ‘contract asset’ and ‘contract liability’ to describe what might more commonly be known as ‘accrued income’ and ‘deferred income’, however the Standard does not prohibit an entity from using alternative descriptions in the statement of financial position. The Group has not adopted the terminology used in IFRS 15 to describe such balances. The Group’s accounting policies for its revenue stream are disclosed in detail below. Apart from providing more extensive disclosures on the Group’s revenue transactions, the application of IFRS 15 has not had a significant impact on the financial position and financial performance of the Group. The Group recognises revenue from the rendering of tower services provided by utilisation of the Group’s tower infrastructure pursuant to written contracts with its customers. Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for services provided in the normal course of business, less VAT and other sales-related taxes. Revenue is reduced for estimated and agreed liquidated damages resulting from failure to meet the agreed service performance levels set out in the contract. The Group provides tower and related services for the utilisation of its tower infrastructure to mobile and other telecommunication operators. Revenue includes fees for the provision of tower infrastructure, power escalations and tower service contracts. These services are recognised as the performance obligation is satisfied over time. Customers are usually billed in advance creating a contract liability which is then recognised as the performance obligation is met over a straight-line basis. Revenue related to power escalations is recognised when the escalation is calculated in accordance with the contractual terms. Though multiple performance obligations arise as a result of the provision of these services, the Group considers it reasonable to combine the provision of these tower services into a single performance obligation as this does not impact the ultimate pattern of revenue recognition as they are all recognised over time. Lessee accounting In the prior year, the Group applied IFRS 16 Leases in advance of its effective date. The Group holds leases primarily on land, buildings and motor vehicles used in the ordinary course of business. Based on the accounting policy applied the Group recognises a right-of-use asset and a lease liability at the commencement date of the contract for all leases conveying the right to control the use of an identified asset for a period of time. The commencement date is the date on which a lessor makes an underlying asset available for use by a lessee. The right-of-use assets are initially measured at cost, which comprises: • the amount of the initial measurement of the lease liability; • any lease payments made at or before the commencement date, less any lease incentives received; and, • any initial direct costs incurred by the lessee. After the commencement date the right-of-use assets are measured at cost less any accumulated depreciation and any accumulated impairment losses and adjusted for any remeasurement of the lease liability. The Group depreciates the right-of-use asset from the commencement date to the end of the lease term. The lease liability is initially measured at the present value of the lease payments that are not paid at that date. These include: • fixed payments, less any lease incentives receivable; and • variable lease payments that depend on a fixed rate, as at the commencement date. 70 Helios Towers | Annual Report 2018 Financial Statements 2. Accounting Policies (continued) Lessee accounting (continued) Variable lease payments not included in the initial measurement of the lease liability are recognised in the consolidated statement of profit or loss as they arise. The lease payments are discounted using the incremental borrowing rate at the commencement of the lease contract or modification. Generally it is not possible to determine the interest rate implicit in the land and building leases. The incremental borrowing rate is estimated taking account of the economic environment of the lease, the currency of the lease and the lease term. The lease term determined by the Group comprises: • non-cancellable period of lease contracts; • periods covered by an option to extend the lease if the Group is reasonably certain to exercise that option; and • periods covered by an option to terminate the lease if the Group is reasonably certain not to exercise that option. After the commencement date the Group measures the lease liability by: • increasing the carrying amount to reflect interest on the lease liability; • reducing the carrying amount to reflect lease payments made; and • remeasuring the carrying amount to reflect any reassessment or lease modifications. Interest expense Interest expense is recognised as interest accrues, using the effective interest method, to the net carrying amount of the financial liability. The effective interest method is a method of calculating the amortised cost of a financial asset/financial liability and of allocating interest income/interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts/payments through the expected life of the financial assets/financial liabilities, or, where appropriate, a shorter period. Retirement benefit costs Payments to defined contribution retirement benefit schemes are recognised as an expense when employees have rendered service entitling them to the contributions. Payments made to state-managed retirement benefit schemes are dealt with as payments to defined contribution schemes where the Group’s obligations under the schemes are equivalent to those arising in a defined contribution retirement benefit scheme. Taxation The tax expense represents the sum of the tax currently payable and deferred tax. Current tax The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the statement of profit or loss and other comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date. Deferred tax Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the statement of financial position liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Helios Towers | Annual Report 2018 71 Financial StatementsGovernance ReportStrategic ReportOverview Notes to the Financial Statements For the year ended 31 December 2018 continued 2. Accounting Policies (continued) Deferred tax (continued) Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised based on tax laws and rates that have been enacted or substantively enacted at the reporting date. Deferred tax is charged or credited in the profit or loss, except when it relates to items charged or credited in other comprehensive income, in which case the deferred tax is also dealt with in other comprehensive income. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. Current tax and deferred tax for the year Current and deferred tax are recognised in the statement of profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Foreign currency exchange The individual financial statements of each Group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each Group company are expressed in United States Dollars (“US$”), which is the functional currency of the Company, and the presentation currency for the consolidated financial statements. In preparing the financial statements of the individual companies, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are re-translated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not re-translated. For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated at exchange rates prevailing on the reporting date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in a separate component of equity (attributed to non-controlling interests as appropriate). On the disposal of a foreign operation (i.e. a disposal of the Group’s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, or a partial disposal of an interest in a joint arrangement or an associate that includes a foreign operation of which the retained interest become a financial asset), all of the exchange differences accumulated in a separate component of equity in respect of that operation attributable to the owners of the Company are reclassified to profit or loss. In addition, in relation to a partial disposal of a subsidiary that includes a foreign operation that does not result in the Group losing control over the subsidiary, the proportionate share of accumulated exchange differences are re-attributed to non- controlling interests and are not recognised in profit or loss. For all other partial disposals (i.e. partial disposals of associates or joint arrangements that do not result in the Group losing significant influence or joint control), the proportionate share of the accumulated exchange differences is reclassified to profit or loss. 72 Helios Towers | Annual Report 2018 Financial Statements2. Accounting Policies (continued) Property, plant and equipment Items of property, plant and equipment are stated at cost of acquisition or production cost less accumulated depreciation and impairment losses, if any. Assets in the course of construction for production, supply or administrative purposes, are carried at cost, less any recognised impairment loss. Cost includes material and labour and professional fees in accordance with the Group’s accounting policy. Depreciation of these assets, on the same basis as other assets, commences when the assets are ready for their intended use. Freehold land is not depreciated. Right-of-use assets Site Assets – Towers Site Assets – Generators Site Assets – Plant & Machinery Fixtures and Fittings IT Equipment Motor Vehicles Leasehold Improvements Up to 60 years Up to 15 years 8 years 3–5 years 3 years 3 years 5 years 5–10 years Directly attributable costs of acquiring tower assets are capitalised together with the towers acquired and depreciated over a period of up to 15 years in line with the assets. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from continued use of the asset. Any gain or loss arising on disposal or retirement of an item of property, plant and equipment is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognised in profit and loss. Intangible assets Contract acquired related intangible assets are amortised on a straight-line basis over the life of the contract. Other intangible assets are amortised on a straight-line basis over their estimated lives of 3–10 years. An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in profit or loss when the asset is derecognised. Impairment of tangible and intangible assets At each reporting date, the Directors review the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Directors estimate the recoverable amount of the cash-generating unit to which the asset belongs. The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss. Investments Investments in subsidiaries are included in the financial statements initially at cost. Cost comprises all the costs associated with the acquisition of the investment including the fair value of the consideration for the investment instruments, any local taxes and costs associated with investigation and negotiating the acquisition. At the end of each financial reporting year, the Directors review the investment instruments to determine the recoverable amount. If the recoverable amount is considered to be less than cost, an impairment provision is recognised. Costs incurred in the investigation of prospective investments are expensed in the year in which they are incurred. Should prospective investments become subsidiaries, the directly attributable costs of investment are capitalised as part of the cost of the investment. Inventory Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the weighted average method. Helios Towers | Annual Report 2018 73 Financial StatementsGovernance ReportStrategic ReportOverview Notes to the Financial Statements For the year ended 31 December 2018 (continued) 2. Accounting Policies (continued) Trade and other receivables Trade receivables are recognised by the Group and the Company carried at original invoice amount less an allowance for any non-collectable or impaired amounts. The Group uses the IFRS 9 ECL model to measure loss allowances at an amount equal to their lifetime expected credit loss. Other receivables are recognised at fair value. Subsequent measurement is at amortised cost using the effective interest method, less any impairment. Cash and cash equivalents Cash and cash equivalents comprise cash at bank and in hand and short-term deposits. Short-term deposits are defined as deposits with an initial maturity of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purposes of the statement of cash flows. Derivative financial instruments Short-term debtors and creditors are treated as financial assets or liabilities. The Group does not trade in financial instruments. The Group enters into derivative financial instruments to manage its exposure to interest rate risk. Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The resulting gain or loss is recognised in profit or loss immediately. A derivative with a positive fair value is recognised as a financial asset whereas a derivative with a negative fair value is recognised as a financial liability. A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realised or settled within 12 months. Other derivatives are presented as current assets or current liabilities. Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at fair value through profit or loss. Embedded derivatives are disclosed separately in the statement of financial position. Other financial liabilities Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. Derecognition of financial liabilities The Group and the Company derecognise financial liabilities when, and only when, the Group’s and the Company’s obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss. Related parties For the purpose of these financial statements, parties are considered to be related to the Group if they have the ability, directly or indirectly to control the Group or exercise significant influence over the Group in making financial or operating decisions, or vice versa, or where the Group is subject to common control or common significant influence. Related parties may be individuals or other entities. Deferred income Deferred income is recognised when payments are received from customers in advance of services being provided. The Group policy is to bill customers in advance, thus creating deferred income. The deferred income is included as a current liability within trade and other payables. New accounting pronouncement The Group has adopted all of the new and revised Standards and Interpretations issued by the International Accounting Standards Board (“IASB”) and International Financial Reporting Interpretations Committee (“IFRIC”) of the IASB that are relevant to its operations and effective for accounting periods covered by the financial statements. New and revised IFRSs in issue but not yet effective At the date of authorisation of the financial statements, there were no new and revised IFRSs that have been issued but are not yet effective or have not already been adopted by the Group. 74 Helios Towers | Annual Report 2018 Financial Statements2. Accounting Policies (continued) Critical accounting judgements and key sources of estimation uncertainty In the application of the Group’s accounting policies, which are described above, the Directors are required to make judgements (other than those involving estimations) that have a significant impact on the amounts recognised and to make estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Critical judgements in applying the Group’s accounting policies The following are the critical judgements, apart from those involving estimations (which are dealt with separately below), that the Directors, have made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements. Revenue recognition Revenue is recognised as service revenue in accordance with IFRS 15: Revenue from contracts with customers. In arriving at this assessment the Directors concluded that there is not an embedded lease because its contracts permit it, subject to certain conditions, to relocate customer’s equipment on its towers in order to accommodate other tenants and therefore the contract does not provide the customer with the right to a specific location on the tower. Business combinations From time to time, the Group acquires a portfolio of towers, comprising the tower infrastructure and other associated assets. The Directors assess each acquisition on the basis of its purchase agreement and the substance of the transaction to determine if it is considered to be a business combination in accordance with IFRS 3. To date, such portfolio acquisitions do not meet the definition of a business under IFRS 3 since they do not represent integrated sets of activities and assets that are capable of being conducted and managed independently, and consequently have been accounted for as an asset acquisition under IAS 16. Accordingly, no goodwill is recognised and the costs incurred are capitalised as part of the costs of acquisition of the towers. Key sources of estimation uncertainty The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below. Fair value of derivative financial instruments Derivative financial instruments are held at fair value through profit and loss. In estimating the fair value of an asset or a liability, the Group uses market-observable data to the extent it is available. Where Level 1 inputs are not available, the Group engages a third party qualified valuer to perform the valuation. Management works closely with the qualified external valuer to establish the appropriate valuation techniques and inputs to the model. Information about the valuation techniques and inputs used in determining the fair value of the derivative financial instrument is disclosed in note 25. Providing for doubtful debts The Group provides services to business customers on credit terms. Certain debts may not be recovered due to default of our customers. The Group uses the IFRS 9 ECL model to measure loss allowances at an amount equal to their lifetime expected credit loss. Further detail of the loss allowance calculation is given in note 25. Helios Towers | Annual Report 2018 75 Financial StatementsGovernance ReportStrategic ReportOverviewNotes to the Financial Statements For the year ended 31 December 2018 (continued) 3. Segmental reporting The following segmental information is presented in a consistent format with management information considered by the CEO of each operating segment, and the CEO and CFO of the Group, who are considered to be the chief operating decision makers (“CODM”). Operating segments are determined based on geographical location. All operating segments have the same business of operating and maintaining telecoms towers and renting space on such towers. Accounting policies are applied consistently for all operating segments. The segment operating result used by CODM is Adjusted EBITDA, which is defined in note 4. 31 December 2018 Revenue Gross margin Adjusted EBITDA Adjusted EBITDA margin Financing costs Interest costs Foreign exchange differences 31 December 2017 Revenue Gross margin Adjusted EBITDA Adjusted EBITDA margin Financing costs Interest costs Foreign exchange differences Ghana US$’000 40,967 66% 22,835 56% Tanzania US$’000 149,909 65% 86,153 57% DRC US$’000 140,881 60% 72,466 51% Congo Brazzaville US$’000 24,292 67% 12,107 50% Total operating companies US$’000 356,049 63% 193,561 54% Corporate US$’000 – – (15,958) – Group total US$’000 356,049 63% 177,603 50% (5,087) (3,549) (54,309) (11,300) (47,275) – (8,367) (3,305) (115,038) (18,154) 26,062 125 (88,976) (18,029) (8,636) (65,609) (47,275) (11,672) (133,192) 26,187 (107,005) Ghana US$’000 40,144 56% 17,821 44% Tanzania US$’000 141,230 56% 66,839 47% DRC US$’000 140,156 55% 66,530 47% Congo Brazzaville US$’000 23,427 61% 9,783 42% Total operating companies US$’000 344,957 56% 160,973 47% Corporate US$’000 – – (15,011) – Group total US$’000 344,957 56% 145,962 42% (4,528) (4,470) (65,324) (7,732) (51,053) 9 (10,760) 6,117 (131,665) (6,076) 32,137 2,847 (99,528) (3,229) (8,998) (73,056) (51,044) (4,643) (137,741) 34,984 (102,757) Capital Additions, Depreciation and Amortisation Year ended 31 December 2018 Year ended 31 December 2017 Capital Additions US$’000 19,667 37,867 4,031 57,082 Depreciation and Amortisation US$’000 8,038 52,955 11,791 59,408 Capital Additions US$’000 13,228 66,273 10,209 80,887 Depreciation and Amortisation US$’000 7,955 51,592 11,651 53,294 118,647 132,192 170,597 124,492 382 375 142 13,210 119,029 132,567 170,739 137,702 31 December 2018 Capital additions US$’000 31 December 2017 Capital additions US$’000 578 1,885 206 3,775 6,444 532 7,611 466 5,212 13,821 Ghana Tanzania Congo Brazzaville Democratic Republic of Congo Total Operating Companies Corporate Total Right-of-use assets Ghana Tanzania Congo Brazzaville Democratic Republic of Congo Total 76 Helios Towers | Annual Report 2018 Financial Statements4. Adjusted EBITDA The segment operating result used by the chief operating decision makers is Adjusted EBITDA. Management define Adjusted EBITDA as loss for the year, adjusted for loss for the year from discontinued operations, additional tax, income tax, finance costs, other gains and losses, investment income, loss on disposal of property, plant and equipment, amortisation and impairment of intangible assets, depreciation and impairment of property, plant and equipment, deal costs relating to unsuccessful tower acquisition transactions or successful tower acquisition transactions that cannot be capitalised and exceptional items. Exceptional items are items that are considered exceptional in nature by management by virtue of their size and/or incidence. There are no cash-flow or tax effects to be disclosed. Adjusted EBITDA is reconciled to loss before tax as follows: The Group Adjusted EBITDA Adjustments applied to give Adjusted EBITDA Exceptional items: Restructuring costs(i) Litigation costs(ii) Tanzanian IPO(iii) Exceptional project costs(iv) Deal costs(v) Deal costs for aborted acquisitions Loss on disposal of assets Other gains and losses (note 24) Recharged depreciation(vi) Depreciation of property, plant and equipment Amortisation of intangibles Investment income Finance costs Loss before tax 2018 US$’000 2017 US$’000 177,603 145,962 – (10,180) – (14,655) (1,493) – (5,835) (16,831) (805) (132,955) (8,373) 951 (107,005) (2,298) (917) (1,481) (9,780) – (3,306) (2,018) 21,797 (1,209) (127,148) (21,778) 706 (102,757) (119,578) (104,227) (i) Restructuring costs reflect specific actions taken by management to improve the Group’s future profitability and mainly comprise the costs of an operational excellence programme where management worked to optimise operational headcount to gain efficiencies and adopt robust internal compliance best practices, and have therefore incurred certain severance and office closure costs in 2017. Management consider such costs to be exceptional as they are not representative of the trading performance of the Group’s operations. (ii) Litigation costs relate to legal and settlement costs incurred in connection with a previously terminated equity transaction. (iii) Advisory and other costs relating to the Group’s preparation for the IPO of HTT Infraco, the Group’s primary operating subsidiary in Tanzania. (iv) Exceptional project costs are in relation to the exploration of strategic options for the Group including, but not limited to, a potential London Stock Exchange (LSE) listing. (v) Deal costs relating to the exploration of investment opportunities in South Africa, announced as subsequent events in January 2019. (vi) The Group incurs costs charged to it through a service contract from Helios Towers Africa LLP. Management consider that the depreciation element of the charge should be removed from adjusted EBITDA as it is depreciation in nature. Helios Towers | Annual Report 2018 77 Financial StatementsGovernance ReportStrategic ReportOverview Notes to the Financial Statements For the year ended 31 December 2018 (continued) 5. Operating profit/(loss) Operating loss is stated after charging the following: Cost of inventory expensed Auditor’s remuneration: – Audit and audit-related services – Non-audit fees Depreciation and amortisation Cost associated with aborted investments Staff costs Group Company 2018 US$’000 57,195 903 3,631 141,328 – 13,578 2017 US$’000 62,634 1,783 1,847 148,926 3,306 13,852 2018 US$’000 2017 US$’000 – – 75 – 89 – 1,216 90 – 13,210 – 900 Amortisation of intangible assets is presented in administrative expenses in the statement of profit or loss and other comprehensive income. Non-audit fees in the current year include US$3.1million (2017: US$1.3million) in respect of exceptional project costs (see note 4). 6. Staff costs Staff costs consist of the following components: Wages and salaries Social security costs Group Company 2018 US$’000 13,287 291 13,578 2017 US$’000 13,586 266 13,852 2018 US$’000 2017 US$’000 1,203 13 1,216 900 – 900 The average monthly number of employees during the year was made up as follows: Operations Legal and regulatory Administration Finance Sales and marketing 7. Directors’ remuneration Remuneration Group Company 2018 115 24 30 74 63 306 2017 146 32 26 76 66 346 2018 2017 1 – 2 2 – 5 1 – 2 2 – 5 Group Company 2018 US$’000 2,472 2017 US$’000 2,950 2018 US$’000 2,472 2017 US$’000 2,950 The above remuneration information relates to Directors in Helios Towers, Ltd who were recharged to the Group and the Company by Helios Towers Africa LLP, a related company. None of the Directors received a contribution to a pension scheme in the current or prior year. 78 Helios Towers | Annual Report 2018 Financial Statements8. Investment income Other interest receivable 9. Finance costs Foreign exchange differences Interest costs Interest costs on lease liabilities Deferred loan cost amortisation 10. Tax expense Additional taxes Group Company 2018 US$’000 951 2017 US$’000 706 2018 US$’000 – 2017 US$’000 132 Group Company 2018 US$’000 18,029 73,856 15,120 – 2017 US$’000 3,229 71,608 14,991 12,929 107,005 102,757 2018 US$’000 2017 US$’000 (124) – – – (124) (62) 739 – – 677 Group Company 2018 US$’000 4,369 2017 US$’000 3,207 2018 US$’000 2017 US$’000 – – Though entities in Congo B, Tanzania and DRC have continued to be loss making, minimum tax has been levied based on revenue as stipulated by law in these jurisdictions. Ghana became tax paying in the year ended 31 December 2018. The Company was a Category 2 – Global Business Licence Company (“C2-GBLC”) during the current and preceding financial periods. C2-GBLC is not subject to any income tax in Mauritius. The applicable tax rates for the Company’s subsidiaries range from 20% to 40%. Helios Towers | Annual Report 2018 79 Financial StatementsGovernance ReportStrategic ReportOverviewNotes to the Financial Statements For the year ended 31 December 2018 (continued) 11. Intangible assets The Group Cost At 1 January 2017 Additions during the year Effects of foreign currency exchange differences At 31 December 2017 Additions during the year Disposals during the year Effects of foreign currency exchange differences At 31 December 2018 Amortisation At 1 January 2017 Charge for year Effects of foreign currency exchange differences At 31 December 2017 Charge for year Disposals during the year Effects of foreign currency exchange differences At 31 December 2018 Net book value At 31 December 2018 At 31 December 2017 At 1 January 2017 Right of first refusal US$’000 Non-compete agreement US$’000 Computer software and licence US$’000 Total US$’000 35,000 – – 35,000 – – – 30,000 – – 30,000 – – – 11,403 3,857 (95) 76,403 3,857 (95) 15,165 80,165 2,953 (41) (395) 2,953 (41) (395) 35,000 30,000 17,682 82,682 (17,500) (5,000) – (16,894) (13,106) – (6,453) (3,672) 421 (40,847) (21,778) 421 (22,500) (30,000) (9,704) (62,204) (5,000) – – – – – (3,373) (2) 303 (8,373) (2) 303 (27,500) (30,000) (12,776) (70,276) 7,500 12,500 17,500 – – 13,106 4,906 5,461 4,950 12,406 17,961 35,556 In 2016, alongside the purchase of 967 towers from Airtel Group, a right of first refusal (“ROFR”) agreement was signed with Airtel Group in the DRC giving the Group the right of first refusal over build-to-suit towers that Airtel Group wish to commission. A payment of US$20 million was made for this right and is amortised on a straight line basis over its exercisable period ending on 1 May 2020. As part of the same transaction, the Group and the Company entered into a non-compete Agreement with Airtel Group under which the Group and the Company was granted the right that Airtel will not compete with the Group in DRC and/or Congo Brazzaville. The Group and the Company issued shares with a fair value of US$30 million to Airtel Group for this right commencing on the date of the agreement (5 May 2016) and terminating 12 consecutive months after first closing (7 July 2016). The issuance of these shares was a non-cash transaction. The Company Cost At 1 January 2017 Additions during the year At 31 December 2017 Additions during the year At 31 December 2018 Amortisation At 1 January 2017 Charge for year At 31 December 2017 Charge for year At 31 December 2018 Net book value At 31 December 2018 At 31 December 2017 At 1 January 2017 80 Helios Towers | Annual Report 2018 Non-compete agreement US$’000 Computer software and licence US$’000 30,000 – 30,000 – 30,000 1,131 142 1,273 170 1,443 Total US$’000 31,131 142 31,273 170 31,443 (16,894) (13,106) (30,000) – (993) (104) (1,097) (89) (17,887) (13,210) (31,097) (89) (30,000) (1,186) (31,186) – – 13,106 257 176 138 257 176 13,244 Financial Statements12a. Property, plant and equipment The Group Cost At 1 January 2017 Additions Disposals Reclassifications Effects of foreign currency exchange differences At 31 December 2017 Additions Disposals Effects of foreign currency exchange differences IT equipment US$’000 Fixtures and fittings US$’000 Motor vehicles US$’000 Site assets US$’000 Land US$’000 Leasehold improvements US$’000 Total US$’000 3,882 2,102 (13) – 37 6,008 5,869 – 371 817 120 – – 15 952 100 – (26) 4,741 683 (654) – (68) 911,548 163,751 (1,754) 754 (3,616) 4,702 1,070,683 105,813 (17,837) (19,272) 298 (484) (145) 5,808 – – (754) 211 5,265 3,793 (117) (82) 891 226 – – (2) 927,687 166,882 (2,421) – (3,423) 1,115 1,088,725 116,077 (18,438) (19,171) 204 – (17) At 31 December 2018 12,248 1,026 4,371 1,139,387 8,859 1,302 1,167,193 Depreciation At 1 January 2017 Charge for the year Disposals Effects of foreign currency exchange differences At 31 December 2017 Charge for the year Disposals Effects of foreign currency exchange differences At 31 December 2018 Net book value At 31 December 2018 At 31 December 2017 At 1 January 2017 (1,912) (1,168) 13 (147) (3,214) (2,572) – 82 (480) (206) – (11) (697) (197) – 32 (2,725) (719) 561 80 (267,189) (113,663) 816 4,133 (2,803) (683) 484 87 (375,903) (120,523) 9,557 6,420 (5,704) (862) (2,915) (480,449) – – – – – – – – – (241) (168) – 1 (272,547) (115,924) 1,390 4,056 (408) (219) – 7 (383,025) (124,194) 10,041 6,628 (620) (490,550) 6,544 2,794 1,970 164 255 337 1,456 1,899 2,016 658,938 694,780 644,359 8,859 5,265 5,808 682 707 650 676,643 705,700 655,140 At 31 December 2018, the Group had US$74.5 million (2017: US$111.3 million) of expenditure recognised in the carrying amount of items of site assets that were in the course of construction. On completion of the construction, they will remain within site assets balance. 12b. Right-of-use assets The Group Right of use assets by class of underlying assets Land Buildings Motor vehicles Depreciation charge for right of use assets Land Buildings Motor vehicles 2018 US$’000 2017 (Restated IFRS 16) US$’000 101,617 2,169 – 100,639 4,223 121 103,786 104,983 7,122 1,519 120 8,761 8,080 2,698 446 11,224 Helios Towers | Annual Report 2018 81 Financial StatementsGovernance ReportStrategic ReportOverviewNotes to the Financial Statements For the year ended 31 December 2018 (continued) 13. Investments The Group The Group’s investment of US$132,000 (2017: US$132,000) relates to an interest in Helios Towers Africa LLP. The Group holds 91% of the voting rights of Helios Towers Africa LLP. The Directors do not consider that the Group has control over the operation of Helios Towers Africa LLP as it is a limited liability partnership and has no access to returns from the investment. Therefore the investment has been accounted for as investment at cost. The Company Cost At 1 January and 31 December The subsidiary companies are as follows: 2018 US$’000 2017 US$’000 430,677 430,677 Effective shareholding 2018 Effective shareholding 2017 Name of subsidiaries Country of incorporation Direct % Indirect % Direct % Indirect % Helios Towers Ghana Limited HTG Managed Services Limited HTA Group, Ltd HTA Holdings Ltd Helios Towers DRC S.A.R.L. HT DRC Infraco S.A.R.L. Helios Towers Tanzania Limited HTT Infraco Limited HT Congo Brazzaville Holdco Limited HT Congo SARLU HT Gabon Holdco Limited (Dormant) HT Chad Mauritius Holdco Limited HT Chad SARLU (Dormant) Towers NL Coöperatief U.A. HTA (UK) Partner Ltd HTA Equity GP Ltd McRory Investment B.V. McTam International 1 B.V. Ghana Ghana Mauritius Mauritius Democratic Republic of Congo Democratic Republic of Congo Tanzania Tanzania Mauritius Congo Brazzaville Mauritius Mauritius Chad The Netherlands United Kingdom Cayman Islands The Netherlands The Netherlands 60% – – 100% – – – – – – – – – – 100% 100% – – 40% 100% 100% – 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% – – 100% 100% 60% – – 100% – – – – – – – – – – 100% 100% – – 40% 100% 100% – 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% – – 100% 100% All subsidiaries were incorporated in prior years. Helios Towers, Ltd or its subsidiaries have subscribed to the majority of the shares as shown above. The consideration paid for these shares on incorporation was minimal. The Directors are of the opinion that the investments in subsidiaries are fairly stated and no impairment is required. The registered office address of all subsidiaries is included in Appendix 1. Helios Towers Ghana Limited, HTA Holdings Ltd, Helios Towers DRC S.A.R.L., Helios Towers Tanzania Limited, HT Congo Brazzaville Holdco Limited, HT Chad Mauritius Holdco Limited, Towers NL Coöperatief U.A., McRory Investment B.V., McTam International 1 B.V. and HTA (UK) Partner Ltd are intermediate holding companies. HTA Equity GP, Ltd acts as a general partner. The principal activities of HTG Managed Services Limited, HT DRC Infraco S.A.R.L., HTT Infraco Limited, and HT Congo SARLU are the building and maintenance of telecommunications towers to provide space on those towers to wireless telecommunication service providers in Africa. HT Chad SARLU and HT Gabon Holdco Limited have ceased trading during the prior years. 82 Helios Towers | Annual Report 2018 Financial Statements14. Inventories Inventories Group 2018 US$’000 10,265 2017 US$’000 9,538 Inventories are primarily made up of fuel stocks and raw materials. The impact of inventories recognised as an expense during the year in respect of continuing operations was US$57.2 million (2017: US$62.6 million). There is no material difference between the carrying value of inventories and their net realisable value. 15. Trade and other receivables Trade receivables Loss allowance Trade receivable from related parties Other receivables from related parties Other receivables VAT & Withholding tax receivable Group Company 2018 US$’000 72,030 (6,544) 65,486 10,035 75,521 – 21,400 5,329 2017 US$’000 72,996 (4,725) 68,271 9,436 77,707 – 23,027 7,757 2018 US$’000 2017 US$’000 – – – – – – – – – 494,451 26 – – 482,783 19 – 102,250 108,491 494,477 482,802 The Group measures the loss allowance for trade receivables and trade receivables from related parties at an amount equal to lifetime expected credit losses (“ECL”). The expected credit losses on trade receivables are estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor’s current financial position, adjusted for factors that are specific to the debtors, general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast direction of conditions at the reporting date. There has been no change in the estimation techniques or significant assumptions made during the current reporting period. Interest can be charged on past due debtors. The normal credit period of services is 30 days. Other receivables mainly comprise of accrued income, and sundry receivables. Of the trade receivables balance at 31 December 2018, 55% (31 December 2017: 67%) is due from four of the Group’s largest customers. The Group does not hold any collateral or other credit enhancements over these balances nor does it have a legal right of offset against any amounts owed by the Group to the counterparty. The average trade receivables collection period is 40 days (31 December 2017: 44 days). Debtor days are calculated as trade receivables and receivables from related parties, less loss allowance, less amounts invoiced but not yet due (2018: US$36.2 million, 2017: US$35.2 million), relative to average monthly revenue for the last quarter (2018: US$90.3 million, 2017: US$88.4 million). Helios Towers | Annual Report 2018 83 Financial StatementsGovernance ReportStrategic ReportOverviewNotes to the Financial Statements For the year ended 31 December 2018 (continued) 15. Trade and other receivables (continued) Ageing analysis of trade receivables not impaired: Not yet due 1–30 days 30–60 days 60–90 days 90+ days Group 2018 US$’000 2017 US$’000 36,169 14,609 7,469 5,172 12,102 75,521 35,248 10,940 14,230 7,680 9,609 77,707 In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. The Directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value. Terms and conditions attached to receivable balances due by related parties and by the non-controlling interest are disclosed in note 23. 16. Prepayments Prepayments Prepayments are primarily comprised of advance payments to suppliers. 17. Cash and cash equivalents Bank balances Short-term deposits 18. Share capital Authorised, issued and fully paid Ordinary share capital class A of US$1 Ordinary share capital class C of US$100 Ordinary share capital class D of US$1 Ordinary share capital class G of US$1 Ordinary share capital class H of US$100 Ordinary share capital class Z of US$100 Group Company 2018 US$’000 2017 US$’000 2018 US$’000 2017 US$’000 16,225 23,403 334 221 Group Company 2018 US$’000 57,835 31,152 88,987 2017 US$’000 49,519 70,181 119,700 2018 US$’000 4,555 – 4,555 2017 US$’000 18,314 – 18,314 Group and Company 2018 Number of shares 390,410,138 100 100 518,714,176 100 100 US$’000 390,410 10 – 518,714 10 10 2017 Number of shares 390,410,138 100 100 518,714,176 100 100 US$’000 390,410 10 – 518,714 10 10 909,124,714 909,154 909,124,714 909,154 The Class A Shares and Class G Shares rank equally with each other and senior to the Class C, Class D, Class H, and Class Z shares as to redemption proceeds and any other form of distribution or return of capital. Class A and G Shares have voting rights whilst the others have no voting rights. Class H and Class Z shares also have dividend rights. 84 Helios Towers | Annual Report 2018 Financial Statements19. Trade and other payables Trade payables Amounts payable to related parties Deferred income Deferred consideration Other payables and accruals VAT & Withholding tax payable Group Company 2018 US$’000 2017 US$’000 8,352 263 48,071 8,246 64,025 20,795 11,612 1,617 40,482 12,946 69,214 11,453 149,752 147,324 2018 US$’000 – 46,584 – – 4,978 – 51,562 2017 US$’000 – 2,082 – – 8,727 – 10,809 Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken for trade purchases is 16 days (2017: 24 days). Payable days are calculated as trade payables and payables to related parties and the non-controlling interest, divided by cost of sales plus administration expenses less staff costs and depreciation. No interest is charged on trade payables. The Group has financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms. Amounts payable to related parties are unsecured, interest free and repayable on demand. Deferred income primarily relates to site equipment revenue which is billed in advance. Deferred consideration relates to consideration that is payable in the future for the purchase of certain tower assets in DRC and Congo B following the Airtel deal if certain conditions are met to enable transfer of ownership of the assets to Helios Towers, Ltd. Other payables and accruals consist of general operational accruals, accrued capital items, and goods received but not yet invoiced. Trade and other payables are classified as financial liabilities and measured at amortised cost. These are initially recognised at fair value and subsequently at amortised cost. These are expected to be settled within a year. The Directors consider the carrying amount of trade payables approximates to their fair value. 20. Loans US$ 600 million 9.125% senior notes 2022 US$ 100 million term loan facility 2022 Total borrowings Current Non-current 31 December 2018 US$’000 31 December 2017 US$’000 602,852 25,192 628,044 17,254 610,790 598,354 – 598,354 17,254 581,100 628,044 598,354 On 8 March 2017, HTA Group Limited, a wholly-owned subsidiary of Helios Towers, Ltd, issued US$600 million of 9.125% bonds due 2022 which are listed on the Irish Stock Exchange. Interest is payable semi-annually beginning on 8 September 2017. The bonds are guaranteed on a senior basis by the Company, and certain of the Helios Towers, Ltd subsidiaries. Loans are classified as financial liabilities and measured at amortised cost. On 22 October 2018, HTA Group Ltd, a wholly owned subsidiary of the Group, signed a US$100 million term loan facility agreement. At 31 December 2018, US$25.0 million was drawn, and US$0.2 million of interest accrued. The term loan is a bullet repayment, senior unsecured facility, with an interest rate of LIBOR plus 4.2%. The term loan is guaranteed by the Company. The current portion of borrowings relates to accrued interest on the bonds, which is payable in March 2019. Helios Towers | Annual Report 2018 85 Financial StatementsGovernance ReportStrategic ReportOverviewNotes to the Financial Statements For the year ended 31 December 2018 (continued) 21. Lease liabilities Short-term lease liabilities Land Buildings Motor vehicles Long-term lease liabilities Land Buildings 2018 US$’000 2017 US$’000 18,802 757 – 19,559 18,828 1,524 100 20,452 2018 US$’000 2017 US$’000 97,378 1,342 98,720 94,088 2,009 96,097 The below undiscounted cash flows do not include escalations based on CPI or other indexes which change over time. Renewal options are considered on a case by case basis with judgements around the lease term being based on management’s contractual rights and their current intentions. The total cash paid on leases in the year was US$25.5 million (2017: US$25.8 million). The profile of the outstanding undiscounted contractual payments fall due as follows: The Group 31 December 2018 31 December 2017 Within 1 year US$’000 2–5 years US$’000 5+ years US$’000 Total US$’000 19,559 71,640 471,123 562,322 20,452 72,120 443,261 535,833 22. Uncompleted performance obligations The table below represent uncompleted performance obligations at the end of the reporting period. This is total revenue which is contractually due to the Group, subject to the performance of the obligation of the Group related to these revenues. Total contracted revenue 2018 US$’000 2017 US$’000 3,080,871 3,101,429 Contracted Revenue The following table provides our total contracted revenue by country under agreements with our customers as of 31 December, 2018 for each of the four years from 2019 to 2022, with local currency amounts converted at the applicable spot rate for US dollars on 31 December, 2018 held constant. Our contracted revenue calculation for each year presented assumes: (i) no escalation in fee rates, (ii) no increases in sites or tenancies other than our committed colocations described elsewhere in these financial statements, (iii) our customers do not utilise any cancellation allowances set forth in their MLAs and (iv) our customers do not terminate MLAs early for any reason. (US$’000s) Tanzania DRC Congo Brazzaville Ghana Total 86 Helios Towers | Annual Report 2018 Year ended 31 December 2019 2020 2021 2022 159,397 150,145 22,834 37,371 159,345 157,721 21,875 36,714 158,969 157,669 17,059 34,704 155,987 155,846 16,954 30,478 369,747 375,655 368,401 359,265 Financial Statements23. Related party transactions The Group Balances and transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. During the year, the Group companies entered into the following commercial transactions with related parties: Millicom Holding B.V. and subsidiaries Vodacom Group Limited and subsidiaries Millicom Holding B.V. and subsidiaries(i) Vodacom Group Limited and subsidiaries(ii) Helios Towers Africa LLP 2018 2017 Income from towers US$’000 Purchase of goods US$’000 Income from towers US$’000 68,070 – 250 – 60,182 72,167 Purchase of goods US$’000 5,194 2,588 2018 2017 Amount owed by US$’000 Amount owed to US$’000 Amount owed by US$’000 Amount owed to US$’000 7,988 – 2,047 263 – – 7,366 2,070 – 228 – 1,389 (i) Millicom Holding B.V is a shareholder of Helios Towers Africa, Ltd. (ii) Until October 2017, Vodacom Tanzania Ltd was the non-controlling interest holder in Helios Towers Tanzania Ltd. During the year, the Group received advisory services from Helios Towers Africa LLP, an entity in which the Group has no economic benefits for which fees of US$15.7 million (2017: US$17.0 million) were incurred. At the year end, there was a receivable of US$2.0 million (2017: payable of US$1.4 million) from Helios Towers Africa LLP. Amounts outstanding to related parties carry an interest charge ranging from 0% to 15%. Total compensation of key management for 2018 amounted to US$2.5 million (2017: US$3.0 million) which was recharged by Helios Towers Africa LLP. The Company Amounts receivable from related parties Amounts payable to related parties 2018 US$’000 2017 US$’000 502,128 46,584 482,783 2,082 Other transactions with related parties in the year includes technical and management fee charges for services provided to the subsidiary companies. Amounts receivable from, and payable to, related parties are repayable on demand. Compensation of key management personnel are disclosed in note 7. Intercontinental Trust Limited is considered as a related party to the Company as it provided company secretary services. Name of related party Relationship 2018 Transactions during the year US$’000 2017 Transactions during the year US$’000 2018 Balance due at year end US$’000 2017 Balance due at year end US$’000 Type of transaction Intercontinental Trust Limited Company secretary Fees 44 40 – – 24. Other gains and losses The Group Fair value loss/(gain) on derivative financial instruments 2018 US$’000 16,831 16,831 2017 US$’000 (21,797) (21,797) Helios Towers | Annual Report 2018 87 Financial StatementsGovernance ReportStrategic ReportOverviewNotes to the Financial Statements For the year ended 31 December 2018 (continued) 25. Financial instruments Financial instruments held by the Group at fair value had the following effect on profit and loss: Derivative financial assets Change in Fair value of derivative financial instruments 2018 US$’000 2017 US$’000 16,831 (21,797) Fair value measurements The information set out below provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable: • Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities; • Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and • Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). Some of the Group’s financial assets and financial liabilities are measured at fair value at the end of each reporting period. For all other assets and liabilities the carrying value is approximately equal to the fair value. The information set out below provides information about how the fair values of these financial assets and financial liabilities are determined (in particular, the valuation technique(s) and inputs used). For those financial instruments measured at fair value, the Group has categorised them into a three level fair value hierarchy based on the priority of the inputs to the valuation technique in accordance with IFRS 13. The hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument in its entirety. There are no financial instruments which have been categorised as Level 1. There were no transfers between the levels in the year. Capital risk management The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of debt, which includes borrowings disclosed in notes 20 and 21, cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in the statement of changes in equity. Gearing ratio The Group keeps its capital structure under review. The gearing ratio at the year end is as follows: Debt (net of issue costs) Cash and cash equivalents Net debt Equity attributable to the owners Debt is defined as long and short-term borrowings, as detailed in notes 20 and 21. Equity includes all capital and reserves of the Group attributable to equity holders of the parent. 2018 US$’000 2017 (Restated IFRS 16) US$’000 746,323 (88,987) 714,903 (119,700) 657,336 121,705 595,203 251,598 540.1% 236.6% 88 Helios Towers | Annual Report 2018 Financial Statements 25. Financial instruments (continued) Externally imposed capital requirements The Group is not subject to externally imposed capital requirements. Significant accounting policies Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 2 to the financial statements. Categories of financial instruments Financial assets Financial assets at amortised cost: Cash and cash equivalents Trade and other receivables Fair value through profit or loss: Derivative financial assets Financial liabilities Amortised cost: Trade and other payables Finance lease liabilities Loans Group Company 2018 US$’000 2017 US$’000 2018 US$’000 2017 US$’000 88,987 96,921 119,700 100,734 4,555 494,477 18,314 482,802 7,086 23,917 – – 192,994 244,351 499,032 501,116 80,886 118,279 628,044 95,389 116,549 598,354 827,209 810,292 51,562 – – 51,562 10,809 – – 10,809 At 31 December 2018, the Group had US$Nil (2017: US$Nil) of cash pledged as collateral for financial liabilities. Financial risk management objectives and policies The Group’s finance function provides services to the business, coordinates access to domestic and international financial markets, and monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyse exposures by degree and magnitude of risks. These risks include market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk. The Group seeks to minimise the effects of these risks by using derivative financial instruments to hedge these risk exposures. The use of financial derivatives is governed by the Group’s policies approved by the Board of Directors, which provide written principles on foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and non-derivative financial instruments. Compliance with policies and exposure limits is reviewed by the Board of Directors regularly. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. Key financial risks and exposures are monitored through a monthly report to the Board of Directors, together with an annual Board review of corporate treasury matters. The Group and the Company have exposure to sterling (“GBP”) fluctuations, however this is not considered material. Financial risk The principal financial risks to which the Group is exposed through its activities are risks of changes in foreign currency exchange rates and interest rates. Foreign currency risk management The Group undertakes transactions denominated in foreign currencies; consequently exposures to exchange rate fluctuations arise. The Group’s main currency exposures were to the Ghanaian Cedi (“GHS”), Tanzanian Shilling (“TZS”) and Central African Franc (“XAF”) through its main operating subsidiaries. During the year ended 31 December 2018, the Group did not enter into any foreign currency hedging contracts, as management considered foreign exchange risk to be at an acceptable level due to the natural hedge existing in the Group as a result of having both US Dollar, TZS, GHS and XAF denominated revenues and costs, and minimal foreign denominated third party debt levels within the business. Helios Towers | Annual Report 2018 89 Financial StatementsGovernance ReportStrategic ReportOverviewNotes to the Financial Statements For the year ended 31 December 2018 (continued) 25. Financial instruments (continued) The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date are as follows: Liabilities Assets New Ghana Cedi Tanzanian Shilling Central African Franc 2018 US$’000 12,732 32,785 4,165 49,682 2017 US$’000 16,204 176,874 14,314 207,392 2018 US$’000 21,022 63,919 10,646 95,587 2017 US$’000 22,540 71,887 20,598 115,025 Foreign currency sensitivity analysis The following table details the Group’s sensitivity to a 10% increase and decrease in US Dollar against GHS, XAF and TZS. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the year-end for a 10% change in foreign currency rates. A positive number below indicates an increase in profit and other equity where US Dollar weakens 10% against the GHS, XAF or TZS. For a 10% strengthening of US Dollar against the GHS, XAF or TZS, there would be a comparable impact on the profit and other equity. Central African Franc impact New Ghana Cedi impact Tanzania Shillings impact 2018 US$’000 2017 US$’000 2018 US$’000 2017 US$’000 2018 US$’000 2017 US$’000 Impact on profit or loss (648) (628) (829) (634) (3,113) 10,499 This is mainly attributable to the exposure outstanding on GHS, XAF and TZS receivables and payables in the Group at the reporting date. In management’s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk for the Group or the Company as the year-end exposure does not reflect the exposure during the year. The Company is not significantly exposed to foreign currency fluctuations as most of its financial assets and financial liabilities are denominated in its functional currency. Credit risk management Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group uses publicly available financial information and other information provided by the counterparty (where appropriate) to rate its major customers. As of 31 December 2018, the Group has a concentration risk with regards to four of its largest customers and its related parties and the Company has a concentration risk with regards to the receivable balances with related parties. The Group’s exposure and the credit ratings of its counterparties and related parties are continuously monitored and the aggregate value of credit risk within the business is spread amongst a number of approved counterparties. Credit exposure is controlled by counterparty limits that are reviewed and approved by management. The carrying amount of the financial assets recorded in the financial statements, which is net of impairment losses, represents the Group’s and the Company’s exposure to credit risk. The Group uses the IFRS 9 ECL model to measure loss allowances at an amount equal to their lifetime expected credit loss. In order to minimise credit risk, the Group has categorise exposures according to their degree of risk of default. The credit rating information is based on a range of qualitative and quantitative factors that are deemed to be indicative of risk of default, and range from 1 (lowest risk of irrecoverability) to 5 (greatest risk of irrecoverability). Loss allowances for trade receivables from related parties held by the Company are deemed immaterial. The below table shows the Group’s trade and other receivable balance and associated loss allowances in each Group credit rating category. Group Rating Risk of impairment 1 2 3 4 5 Total Remote risk Low risk Medium risk High risk Impaired Group 31 December 2018 Gross exposure US$’000 52,493 20,610 3,851 903 4,208 Loss allowance US$’000 Net exposure US$’000 (225) (898) (631) (582) (4,208) 52,268 19,712 3,220 321 – 82,065 (6,544) 75,521 90 Helios Towers | Annual Report 2018 Financial Statements 25. Financial instruments (continued) Liquidity risk management The Group has long-term debt financing through Senior Loan notes of US$600 million due for repayment in March 2022. The Group has a revolving credit facility of US$60 million for funding working capital requirements. As at 31 December 2018 and 31 December 2017 the facility was undrawn and is available until March 2021. The Group has remained compliant during the year to 31 December 2018 with all the covenants contained in the Senior Credit facility. In October 2018, HTA Group Ltd, a wholly owned subsidiary of the Group, signed a US$100 million term loan agreement. As at 31 December, 2018 US$25 million was drawn. Ultimate responsibility for liquidity risk management rests with the Board of Directors. The Group manages liquidity risk by maintaining adequate reserves and banking facilities and continuously monitoring forecast and actual cash flows including consideration of appropriate sensitivities. Non-derivative financial liabilities The following tables detail the Group’s and the Company’s remaining contractual maturity for its non-derivative financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes principal cash flows. The Group 31 December 2018 Non-interest bearing Fixed interest rate instruments 31 December 2017 Non-interest bearing Fixed interest rate instruments The Company 31 December 2018 Non-interest bearing 31 December 2017 Non-interest bearing Within 1 year US$’000 152,569 – 152,569 147,324 – 147,324 1–2 years US$’000 2–5 years US$’000 5+ years US$’000 Total US$’000 – – – – – – – – – – – – – 610,790 152,569 610,790 610,790 763,359 – 598,354 147,324 598,354 598,354 745,678 Within 1 year US$’000 Total US$’000 51,562 51,562 10,809 10,809 The Group and the Company manage liquidity risk by maintaining adequate reserves and banking facilities and by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Non-derivative financial assets The following table details the Group’s and the Company’s expected maturity for other non-derivative financial assets. The tables below have been drawn up based on the undiscounted contractual maturities of the financial assets except where the Group and the Company anticipates that the cash flow will occur in a different period. The Group 31 December 2018 Non-interest bearing Fixed interest rate instruments 31 December 2017 Non-interest bearing Fixed interest rate instruments Within 1 year US$’000 185,908 – 185,908 220,434 – 220,434 1–2 years US$’000 2–5 years US$’000 5+ years US$’000 Total US$’000 – – – – – – – – – – – – – – – – – – 185,908 – 185,908 220,434 – 220,434 Helios Towers | Annual Report 2018 91 Financial StatementsGovernance ReportStrategic ReportOverviewNotes to the Financial Statements For the year ended 31 December 2018 (continued) 25. Financial instruments (continued) The Company 31 December 2018 Non-interest bearing 31 December 2017 Non-interest bearing Within 1 year US$’000 Total US$’000 506,709 506,709 500,628 500,628 Derivative financial instruments assets: The following table details the Group’s liquidity analysis for its derivative financial instruments based on contractual maturities. The table has been drawn up based on the undiscounted net cash inflows and outflows on derivative instruments that settle on a net basis, and the undiscounted gross inflows and outflows on those derivatives that require gross settlement. When the amount payable or receivable is not fixed, the amount disclosed has been determined by reference to the projected interest rates as illustrated by the yield curves existing at the reporting date. The derivatives represent the fair value of the put and call options embedded within the terms of the notes. The call options give the Group the right to redeem the bond instruments at a date prior to the maturity date (8 March 2022), in certain circumstances and at a premium over the initial notional amount. The put option provides the holders with the right (and the Group with an obligation) to settle the notes before their redemption date in the event of a change in control (as defined in the terms of the notes, which also includes a major asset sale), and at a premium over the initial notional amount. The options are fair valued using an option pricing model that is commonly used by market participants to value such options and makes the maximum use of market inputs, relying as little as possible on the entity’s specific inputs and making reference to the fair value of similar instruments in the market. Thus, it is considered a Level 3 financial instrument in the fair value hierarchy of IFRS 13. The key assumptions in determining the fair value are, the initial fair value of the bond (assumed to be priced at 100% on issue date), the credit spread (derived using Bloomberg analytics at issuance and based on credit market data thereafter), the yield curve and the probabilities of a change in control (0% assumed) and a major asset sale (0% assumed). The probabilities relating to change of control and major asset sale represent a reasonable expectation of those events occurring that would be held by a market participant. The Group 31 December 2018 Net settled: Embedded derivatives 31 December 2017 Net settled: Embedded derivatives Within 1 year US$’000 1–2 years US$’000 2–5 years US$’000 5+ years US$’000 Total US$’000 – – – – – – – – (7,086) (7,086) (23,917) (23,917) – – – – (7,086) (7,086) (23,917) (23,917) Interest rate risk management The Group is exposed to interest rate risk because entities in the Group borrow funds at both fixed and floating interest rates. The risk is managed by the Group by maintaining an appropriate mix between fixed and floating rate borrowings. Hedging activities are evaluated regularly to align with interest rate views and defined risk appetite, ensuring the most cost-effective hedging strategies are applied. The Group’s exposure to interest rates on financial assets and financial liabilities are detailed in notes 20 and 21. The Company is not exposed to interest rate variations as its financial assets and financial liabilities are non-interest bearing. 92 Helios Towers | Annual Report 2018 Financial Statements26. Contingencies In the year ended 31 December 2015, the Democratic Republic of Congo’s National Tax Services issued an assessment against the Group for the financial years ended 31 December 2014 and 31 December 2015 of approximately US$3.4 million including interest and penalties. Also, in the year ended 31 December 2016, the Ghana Revenue Authority issued an assessment against the Company for the financial years ended 31 December 2010 to 31 December 2012 of approximately US$1.0 million for unpaid direct and indirect taxes. The Directors have appealed against these assessments and together with their advisors are in discussion with the tax authorities to bring the matters to conclusions based on the facts. The Directors, having taken advice as appropriate, believe that there is no merit to these assessments and accordingly will defend their position vigorously and do not believe there will be a material impact to the Group. The Group did not make a provision in respect of these matters for the year ended 31 December 2018 or 31 December 2017. 27. Net debt External debt Lease liabilities Derivative financial instruments Net cash and cash equivalents Net debt The movement in net debt is as follows: 2018 Net cash and cash equivalents External debt Lease liabilities Derivative financial instruments Net debt 2017 Net cash and cash equivalents External debt Lease liabilities Derivative financial instruments Net debt 2018 US$’000 2017 US$’000 (628,044) (118,279) – 88,987 (596,418) (116,549) (1,936) 119,700 (657,336) (595,203) At 1 January 2018 US$’000 Cash flows US$’000 Other(1) US$’000 At 31 December 2018 US$’000 119,700 (29,548) (1,165) 88,987 (596,418) (116,549) (1,936) (25,000) 10,422 – (6,626) (12,152) 1,936 (628,044) (118,279) – (714,903) (14,578) (16,842) (746,323) (595,203) (44,126) (18,007) (657,336) At 1 January 2017 US$’000 Cash flows US$’000 Other US$’000 At 31 December 2017 US$’000 133,737 (14,173) 136 119,700 (401,149) (111,045) – (167,938) 11,675 – (27,331) (17,179) (1,936) (596,418) (116,549) (1,936) (512,194) (156,263) (46,446) (714,903) (378,457) (170,436) (46,310) (595,203) (1) Other includes foreign exchange and interest movements. External debt is the total debt owed to commercial banks and institutional investors. 28. Subsequent events In January 2019, the Group entered a shareholder agreement with Vulatel (Pty) Ltd to form a new legal entity named Helios Towers South Africa Holdings (Pty) Ltd. The Group will hold 66% of the share capital of this entity, with Vulatel retaining the remaining 34%. The Group has also signed a sale and purchase agreement (“SPA”) with SA Towers (Pty) Ltd (“SA Towers”) for Helios Towers South Africa Holdings (Pty) Ltd to acquire 89.5% of the share capital of a newly incorporated subsidiary of SA Towers, named SA Towers NewCo (Pty) Ltd. In the short to medium term consideration for these transactions is expected to be up to US$70 million. The Group will control both of these entities and as such, following completion of the transactions, their results will be consolidated into the Group in accordance with the Basis of Consolidation set out on page 67. Helios Towers | Annual Report 2018 93 Financial StatementsGovernance ReportStrategic ReportOverviewAppendix 1 Name of subsidiaries HTA Holdings, Ltd HTA Group, Ltd Registered office address Level 3, Alexander House, 35 Cybercity, Ebene, Mauritius Level 3, Alexander House, 35 Cybercity, Ebene, Mauritius HTA (UK) Partner Ltd 5 Merchant Square, 10th Floor, London, W2 1AS HT Congo Brazzaville Holdco Limited Level 3, Alexander House, 35 Cybercity, Ebene, Mauritius Helios Towers Congo Brazzaville SASU 100 ter, Boulevard Marechal Lyautey, Brazzaville, Republic of Congo Helios Towers DRC SARL 1st Floor, Tower LE 130, 130B, Avenue Kwango, Kinshasa, Gombe, DRC HT DRC Infraco SARL 1st Floor, Tower LE 130, 130B, Avenue Kwango, Kinshasa, Gombe, DRC Helios Towers Tanzania Limited Ground Floor, Peninsula House, Plot No. 251 Toure Drive, P.O. Box 105297, Oysterbay, Dar Es Salaam, Tanzania HTT Infraco Limited Ground Floor, Peninsula House, Plot No. 251 Toure Drive, P.O. Box 105297, Oysterbay, Dar Es Salaam, Tanzania HT Chad SARLU Quartier Chagoua, Avenue du 10 Octobre, BP 6572, N’djamena, Chad Helios Chad Holdoco Limited Level 3, Alexander House, 35 Cybercity, Ebene, Mauritius HTA Equity GP Ltd Level 3, Alexander House, 35 Cybercity, Ebene, Mauritius HT Gabon Holdco Limited Level 3, Alexander House, 35 Cybercity, Ebene, Mauritius Helios Towers Ghana Limited No.31, Akosombo Road, Airport Residential Area, Private Mail Bag CT 409, Cantonments, Accra, Ghana HTG Managed Services Limited No.31, Akosombo Road, Airport Residential Area, Private Mail Bag CT 409, Cantonments, Accra, Ghana Towers NL Coöperatief U.A. Prins Bernhardplein 200, 1097JB Amsterdam McTam International 1 B.V. Oslo 1, 2993LD Barendrecht McRory Investment B.V. Oslo 1, 2993LD Barendrecht 94 Helios Towers | Annual Report 2018 Financial StatementsOfficers and professional advisors Directors Anja Blumert Carlos Reyes Lopez (appointed 17 May 2018) Colin Curvey (resigned 2 May 2018) David Karol Wassong Joshua Ho-Walker (appointed 31 January 2019) Kash Pandya Nelson Oliveira Richard Byrne Simon David Pitcher Simon Hillard Poole Temitope Olugbeminiyi Lawani Umberto Pisoni (appointed 9 July 2018) Vishma Dharshini Boyjonauth Waldemar Rafal Szlezak (resigned 31 January 2019) Xavier Charles Rocoplan Registered office Level 3 Alexander House 35 Cybercity Ebene Mauritius Company secretary Intercontinental Trust Limited Level 3 Alexander House 35 Cybercity Ebene Mauritius Banker Barclays Bank Plc International Banking Division Barclays House 68-68A Cybercity Ebene Mauritius Auditor Deloitte 7th Floor Standard Chartered Tower 19-21 Bank Street Cybercity Ebene 72201 Mauritius This Annual Report and Accounts does not constitute an invitation to underwrite, subscribe for, or otherwise acquire or dispose of any company shares or other securities. This Annual Report and Accounts contains certain forward-looking statements with respect to the financial condition, results, operations and businesses of the company. These statements and forecasts involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. Past performance is no guide to future performance and persons needing advice should consult an independent financial adviser. Helios Towers | Annual Report 2018 95 Financial StatementsGovernance ReportStrategic ReportOverviewNotes 96 Helios Towers | Annual Report 2018 Financial StatementsRegistered office address Level 3 Alexander House 35 Cybercity Ebene Mauritius T: +44 (0) 207 871 3670 F: +44 (0) 207 235 6542 Registered Company Number 092064 H e l i o s T o w e r s | A n n u a l R e p o r t 2 0 1 8 www.heliostowers.com H e l i o s T o w e r s | A n n u a l R e p o r t 2 0 1 8

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