Rodney M. Smith
Executive Vice President, Chief Financial Officer and Treasurer at American Tower
Thanks, Tom. Good morning, and thank you to everyone for joining today's call. As you heard from Tom, we are very encouraged by the technological trends that we believe will drive continued secular growth in the industry and a long runway of growth for American Tower. Before I walk through the details of our Q3 results and revised outlook, I will first touch on several key trends and developments from the quarter, including the evident strength of leasing demand across our footprint and renewed collections volatility in India.
First, we continue to see 4G and 5G investments driving strong demand across our footprint, which translated into solid gross leasing growth in the quarter and we expect this trend to continue and further accelerate particularly in the U.S. as we approach 2023. We complemented sequential growth in organic leasing with nearly 1,600 newly constructed sites internationally earning on average, low double-digit returns on day 1, driven by those same trends. Additionally, demand for hybrid IT solutions optimally suited for our U.S. data center portfolio remains healthy. This resulted in another strong quarter of leasing results, fueled by digital platforms and the continuation of enterprises moving their IT infrastructure from on-premises to interconnection-rich co-location facilities with direct cloud access, such as CoreSite.
Next, we closed on Stonepeak's initial $2.5 billion investment in our U.S. data center business in August which was upsized by another $570 million after quarter end at the same valuation in terms. This further highlights the differentiated characteristics and value of the CoreSite portfolio while establishing a partnership through which we will execute on our U.S. data center strategy. Also, we signed a new comprehensive MLA with Verizon at the end of August, which is expected to allow Verizon to efficiently accelerate their 5G network deployment over a multiyear period.
This agreement is yet another data point, illustrating the fundamental long-term criticality of our portfolio as our customers seek to leverage our scale and capabilities to rapidly deploy nationwide 5G and further provides tangible evidence that our U.S. business should have a solid runway of growth over the next several years. Additionally, we executed a new multimarket MLA with Airtel Africa, our largest customer in the region. Under this new long-term agreement, we've secured attractive terms across our existing Nigeria, Kenya, Uganda and Niger portfolio along with a contractually committed, attractive build-to-suit pipeline to support Airtel Africa's 5G deployment, among other opportunities. Importantly, with Airtel Africa, we share a focus on advancing wireless connectivity in a sustainable manner, which is represented in this agreement through a commitment to deploy low-carbon sites and expand our digital communities program. Our agreements with both Verizon and Airtel Africa, two of our largest customers is the latest demonstration of the value our global scale and operational capabilities as a company, both in markets and across borders, can unlock to provide mutually beneficial solutions for American Tower and our partners.
With that, I'd like to take a moment to address some uncertainty related to collections arising out of our India operations and how this event has affected our results for Q3 and revised outlook for 2022. In Q3, collections from Vodafone Idea or VIL, fell short of our billings. And the customer has also communicated an expectation for that trend to continue through the balance of this year. As a result, we found it prudent to take certain reserves associated with VIL in Q3 and against the anticipated Q4 billing shortfall in our revised guidance. Consequently, our full year expectations now include approximately $95 million in additional revenue reserves, about half of which was booked in Q3. It also includes the removal of a $30 million bad debt reversal that was assumed in our prior guidance. Together, these result in a reduction in adjusted EBITDA and attributable AFFO of $125 million.
At this time, our revised outlook for net income does not assume any additional impairment charges associated with the goodwill and intangibles that we currently have on the books associated with VIL as the shortfall in cash flows is being viewed as temporary. It should also be noted that VIL did express a commitment to revert back to 100% payment at the start of 2023 and repay outstanding pass-through balances, which could potentially provide an opportunity to reverse certain reserves we've taken in the future. VIL has also laid out a set of strategic steps that we will closely monitor on its path to more stabilized and consistent payment including the conversion of its AGR interest into equity held by the Indian government. However, until then, we expect continued uncertainty in collections for VIL and I have reflected those risks in our revised outlook.
In the meantime, we are actively working with VIL on the path forward, which could potentially include converting a portion of its existing AR into optionally convertible notes, which we believe can better secure our receivables. We will incorporate new developments that unfold over the next several months into our guidance for 2023 on this February's call. With that, please turn to slide six, and I'll review our Q3 property revenue and organic tenant billings growth. As you can see, our Q3 consolidated property revenue of $2.6 billion increased by over 10% and over 14% on an FX-neutral basis as compared to the prior year period.
Growth was primarily driven by solid organic leasing, execution on our international new build program in contributions from our U.S. data center business, partially offset by headwinds of approximately 2% associated with revenue reserves taken in India during the quarter, as discussed, and another 2% from Sprint related churn. Moving to the right side of the slide, you can see we achieved consolidated organic tenant billings growth of 2.6% for the quarter. In the U.S. and Canada, as expected, net organic growth was slightly positive at 0.3%, including a sequential step-up in gross organic new business of $38 million, a meaningful acceleration from $31 million in Q2 in our highest quarter since Q1 of 2020. As we have indicated throughout the year, we expect this acceleration to continue into Q4 and even further in 2023, where a large portion of our growth will be contractually committed through our comprehensive MLAs. Escalators were 2.8%, which, consistent with last quarter, were impacted by certain timing mechanics within our MLAs. Though for the full year, we expect escalators to come in right around 3%, consistent with historical trends.
This growth was offset by the impact of Sprint churn, which continues to drive over 4% of negative headwinds year-over-year and will step down in Q4 as the largest tranche of contractual Sprint churn will have lapped in our year-over-year growth metric. On the international side, organic growth was 6.1%. Starting with Europe, we saw growth of 6%, which is now at a more normalized level with Telxius largely in the prior year base. In Africa, we generated organic tenant billings growth of 6.8%, modestly higher than prior expectations due to some delays in anticipated churn, now pushed to later in the year. Growth also included another strong quarter of gross organic new business standing at 7.5%, putting Africa on track for its best organic new business year on record, and continuing past quarter trends, we saw the strong organic leasing activity complemented with an active new build program constructing just over 250 sites in the quarter as we see 4G coverage and densification initiatives continue to drive strong top line growth and returns on our capital deployments across the region. Moving to Latin America.
Organic growth was 8.2%, which includes approximately 9.7% from escalations. Growth through organic new business and escalations was partially offset by another quarter of elevated churn primarily associated with certain decommissioning agreement, which we expect to further accelerate in Q4 as highlighted on previous earnings calls. In APAC, we saw organic growth of 1.9%, in line with our expectations, which comes alongside a continuation of solid new build activity with 1,200 sites constructed during the quarter. Turning to slide seven.
Our third quarter adjusted EBITDA grew nearly 6% or over 8.5% on an FX-neutral basis to over $1.6 billion with strong revenue growth and cost controls, partially offset by the negative impacts of Vodafone Idea revenue reserves and Sprint related churn, together representing approximately 6% headwinds to growth. Adjusted EBITDA margin was 61.5%, down 170 basis points year-over-year driven by the lower margin profile of newly acquired assets, the conversion impacts of Vodafone Idea reserves and Sprint churn along with higher pass-through revenue resulting from fuel costs.
Moving to the right side of the slide, attributable AFFO, and attributable AFFO per share decreased by approximately 3% and 5%, respectively, with each including a 3% headwind associated with FX. Growth was meaningfully impacted by the Vodafone Idea reserves and Sprint related churn, combining for an over 8% offset to otherwise strong and resilient performance across our global operations. Let's now turn to our revised full year outlook, where I'll start by reviewing a few of the key high-level drivers. First, performance remains solid across our portfolio as demand for wireless connectivity and the rollout of next-generation networks are fueling strong new business volumes across our regions. Together with the straight-line benefit from our recently executed MLAs along with pass-through increases primarily related to power and fuel, we're raising our property revenue and adjusted EBITDA guidance for the year.
Second, we have revised our FX assumptions using our standard methodology, which has resulted in outlook to outlook headwind of $45 million, $22 million and $13 million for property revenue, adjusted EBITDA and consolidated AFFO, respectively. Finally, and as noted earlier, we have incorporated approximately $125 million in incremental reserves relative to our prior outlook associated with Vodafone Idea. This includes $95 million in revenue reserves split between Q3 and Q4 and the removal of our previous assumption for incremental bad debt reversals of around $30 million.
As I mentioned, Vodafone Idea has communicated its intention to resume full recurring payments in 2023. However, at this time, we believe these adjustments to be appropriate for the current year. With that, let's discuss the details of our revised full year expectations. As you can see on slide eight, we are raising our property revenue outlook by $70 million at the midpoint. This outperformance includes straight-line upside of approximately $65 million, primarily associated with our recently executed Verizon and Airtel Africa MLAs and $77 million in higher pass-through revenue driven by fuel costs, along with various nonrecurring benefits, including accelerated decommissioning-related settlements in Latin America, which we now expect to total approximately $85 million for the full year.
Our guidance raise was also supported by a recurring revenue upside across several of our segments helping to contribute to some modest revisions to our organic tenant billings growth outlook, which I'll touch on shortly. This outperformance was partially offset by the $95 million in incremental revenue reserves related to Vodafone Idea and $45 million in FX. Moving to slide nine, you will see our organic tenant billings growth expectations. While we are reiterating our prior outlook on a consolidated basis and for the U.S. and Canada as well as APAC segment, we are slightly revising our expectations for International, Europe, Latin America and Africa. For international, we are raising our organic growth to approximately 6.5%, up from approximately 6% previously. In Europe, we have adjusted our organic growth expectations to greater than 8% from approximately 9% in our prior outlook, where we expect new business commencements to shift further into 2023. In Latin America, we are increasing our organic growth expectations to greater than 7%, up modestly from approximately 7% in our prior guidance, reflecting a continuation of the CPI-linked escalation benefits in the region.
In Africa, we are increasing our organic growth expectations to greater than 7%, up from approximately 6.5% in our prior guidance, reflecting the delays we're seeing in anticipated churn, as I mentioned earlier. As a reminder, in Latin America and Africa, consistent with prior assumptions, we anticipate consolidation-driven churn events to drive a sequential decline in growth as we exit the year resulting in what we expect to be approximately 4% and 5.5% organic tenant billings growth in Q4, respectively, with some carryover impacts as we head into 2023. Lastly, in the U.S. and Canada, where we are reiterating our prior organic growth outlook, we expect to see Q4 organic tenant billings growth of around 4%, with further improvement in 2023, backstopped by the contractual visibility afforded through our comprehensive MLAs with the big three carriers plus DISH. Moving to slide 10.
We are raising our adjusted EBITDA midpoint by $30 million as compared to our prior outlook, where we're seeing a high conversion of property revenue outperformance delivered through prudent cost controls and continued elevated services volumes, providing meaningful upside as compared to our previous expectations. These benefits are partially offset by the $125 million associated with incremental reserves assumed for Vodafone Idea, as previously discussed along with $22 million in FX. Turning to slide 11. We are lowering our attributable AFFO guidance by $40 million or $0.09 on a per share basis.
This adjustment is attributable to the Vodafone Idea reserves we have taken, which is translating into approximately $0.27 per share of downside, offsetting what was otherwise very strong performance across our business, which represented approximately $0.20 per share outperformance on an FX-neutral basis. Moving to slide 12. Let's start by taking a look at our capital deployment expectations for the year, which are slightly updated compared to our prior outlook and continue to reflect our focus on driving sustained AFFO per share growth and shareholder returns. Within our capital deployment plan, we are reiterating our expectations to dedicate approximately $2.7 billion, subject to Board approval towards our 2022 dividend. With regard to capex, we are reducing our total midpoint by $45 million, with redevelopment decreasing by $35 million and start-up decreasing by $10 million, the result of some timing adjustments and savings as compared to our prior plan.
We continue to assume the construction of approximately 6,500 new sites globally and roughly $300 million towards our U.S. data center business, largely associated with development spend. As we've highlighted in the past, we continue to generate exceptional returns through our discretionary capex program, which remains largely financed through the redeployment of locally generated cash flows. We view our ability to allocate nearly $1.8 billion towards accretive high-yield projects as a strategic benefit after years of building scale and credibility with our global customer base in a compelling way to further build scale and drive accretion for years to come. Finally, although we have not incorporated into our revised guide, I'd like to highlight that with the additional capacity we currently have as we outpace our delevering plan, we expect to opportunistically restart our share buyback program.
Given recent market performance and the strong fundamentals we anticipate in our business over the long term, we see this as a great opportunity to further drive shareholder value, particularly against other forms of capital deployment in our current line of sight. Moving to the right side of the slide, I'd like to take a moment to review the progress we have made since the start of the year to shore up our balance sheet and liquidity position, particularly in light of the market volatility and unprecedented rise in rates occurring over the past several months. As you recall, we closed the CoreSite acquisition using our bank facilities and term loans, temporarily moving our leverage to 6.8 times and our floating rate exposure to 31% at the end of 2021. Since that time and against the challenging backdrop, we have strategically termed out short-term borrowings through common equity, private capital and senior unsecured note offerings, all at solid terms and pricing.
Today, our leverage stands at 5.5 times ahead of plan with floating rate exposure of around 20%, in line with our long-term target. Looking ahead, we continue to believe this profile is appropriate given the predictable and contractual nature of our cash flows while providing us exposure to prepayable debt, which offers us financial flexibility as we execute on our delevering path, and access to the typical low rate short-term curve. In addition, a meaningful portion of our floating rate debt is euro denominated, which provides us a natural hedge and diversified capital structure while also offering prepayable debt at terms more competitive than those currently available in the U.S. Although we anticipate 2023 as it appears today, we'll present certain growth challenges stemming from the current rate environment, we feel comfortable with our proven approach to balance sheet management.
This includes our ability to manage our upcoming 2023 maturities where we expect our diversified sources of capital and solid liquidity position to provide near-term financing flexibility, allowing us to opportunistically access the markets against a healthy and constructive backdrop. In short, we believe our investment-grade balance sheet and the long-standing policies we've established position us well to navigate various economic cycles, including the challenges we're all facing today. And although we may see certain growth headwinds in the near term, we believe our investment-grade credit rating and continued access to diversified sources of capital coupled with our focus on maintaining robust liquidity will serve as a more meaningful competitive advantage over the next several years. Finally, on slide 13.
And in summary, we had a strong Q3 across our global business with solid operating performance, accelerated leasing and resilient demand even in the face of a challenging economic backdrop. During the quarter, the long-term critical nature of our portfolio of assets in positioning to drive sustained and compelling growth was further highlighted through key customer agreements with Verizon and Airtel Africa and the closing and subsequent upsizing of our Stonepeak partnership in our U.S. data center business. Although we will likely experience some growth pressure in the near term associated with the continued rise in interest rates, we see our investment-grade balance sheet, liquidity and diversified sources of capital as a key competitive advantage as we execute on our growth strategy over the next decade and beyond.
As we look ahead and over the long term, we are excited about the positioning of our global portfolio of communications assets as our customers augment and extend their networks to meet exploding data-driven demand and believe our global scale and proven capabilities have us positioned to drive incremental sustainable growth and value creation for our shareholders for years to come.
With that, I'll turn the call back over to the operator for Q&A.
