Airtel Africa Plc (Nigeria) Q3 2022 conference call transcript

By Published On: June 8th, 2022Categories: Corporate announcement, Transcripts

Good day ladies and gentlemen and welcome to the Airtel Africa nine months and third quarter results conference call. All participants are currently in listen only mode. There will be an opportunity to ask questions later during the conference. If you should need assistance during the call, please signal an operator by pressing * then 0. Please note that this call is being recorded. I would now like to hand the conference over to Segun Ogunsanya. Please go ahead, sir.

Segun Ogunsanya
Thank you for joining us on today’s call. For those who may not know, my name is Segun Ogunsanya. I’m the CEO of Airtel Africa Plc. And on this call I’m joined by our CFO, Jaideep Paul, and our Deputy CFO and Head of Investor Relations, Pier. We will shortly be hosting any questions you may have, but first I would like to provide you with a brief overview of the quarter. And I’m pleased to once again be able to report very strong growth across all of our key metrics. Before I take you through the details of the financial numbers, it is important to note that these are an outcome of the continued strength of our operational performance. This quarter we have returned to strong growth of our customer base in Nigeria, our largest market, adding almost 2 million customers in Nigeria and taking the group customer additions to 3.1 million this quarter.

We continue to invest in our network and in our distribution infrastructure with 4G now installed at 83% of our tower sites. In November we won approval in principle for a PSB, payment services bank, for mobile money and Super-Agent licences, giving us further impetus for unlocking the mobile money opportunity available from a market with a total population of around 200 million people, the largest in Africa. I will talk in more details about this and some of our strategic and opportunity developments this quarter in a moment.

But now let me summarise the key financial outcomes. Our third quarter posted very strong growth with our group revenues reaching $1.2 billion with a constant currency growth of 20%. With continued improvement in our operating efficiency this enabled stronger growth of 26.8% in EBITDA to $605 million. Digital and mobile money continued to be our key service growth drivers, together contributing to 44% of our group revenues in the quarter. We also continued to see a strong growth in our voice revenue. It is up almost 10% year on year. Our total customer growth trends are finally returning to the levels seen prior to the introduction of the new law on customer requirements introduced in Nigeria in December 2020. In the last quarter we added 3.1m customers, about 2 million of these in Nigeria, taking our total year on year growth to 6.9 million customers, or about 6%.

Voice revenues posted year on year growth of 9.9%, almost 10% in the quarter, a slight slowdown given the softer quarter particularly in Q1 but still reflecting year on year customer growth of 5.8%, adding voice ARPU growth of 5.2%. We still fundamentally believe that with the low customer penetration levels across our footprint of 14 countries, combined with very low minutes of usage, there is still a very long runway for voice revenues to continue to grow.

Very decent data customer growth rates of 11.1% year on year were supported with particularly strong data ARPU growth of 24.6% delivering very strong data revenue growth of 37.7% year on year. Mobile money posted similar decent metrics with Q3 revenue growth of 29.2% year on year. This was due to strong transaction growth of 28.7% with the active customer base growing by 19.6% and ARPU growth of 8.1%. While still very strong, our growth rates are slightly lower than what we are expecting mainly because of some new levies imposed in Tanzania in the quarter ended June. There will be a few quarters before this falls out of the baseline. If you exclude numbers from Tanzania, our mobile money business grew 37%.

All our regional segments, Nigeria, Franco and East Africa, continued to demonstrate very high revenue growth rates. Nigeria grew by 23.3% year on year, East Africa 21.9%, and Francophone Africa grew by 13.5%.

These strong growth rates and improved operating efficiencies led to increased flow through to uplift our EBITDA margin in the quarter up to 49.6%, a jump of almost 270 basis points over Q3 of last year.

Foreign exchange changes had an adverse impact of $16.2 million on constant currency revenue and $6.6 million on our underlying EBITDA for the quarter. This is largely driven by the devaluation of the Nigerian Naira and Central African Franc, but partially offset by appreciation of the Zambia Kwacha and the Uganda Shilling.

In terms of the balance sheet and cash flow, at the end of December our leverage ratio was 1.4x on underlying EBITDA with a net debt lying at just over $3 billion. In Q3 we generated operating free cash flow of $418 million which is $120 million more than in Q3 of last year. This is largely down to the growth in our EBTIDA. We also announced our intention to redeem our $500 million 2023 bonds in March this year, much earlier than their maturity.

There are a few other strategic and operational announcements I would like to highlight for the quarter. Perhaps the most significant concerns our receipt last year of approvals in principle for both a payment service bank or PSB licence and a Super-Agent licence, both in Nigeria. We are currently working very closely with the Central Bank of Nigeria to meet all the conditions to receive the final operating licences and commence operations in Nigeria. This will enable us to expand our digital financial products and reach millions of Nigerians who up to now have not had any access to traditional services. Also in Nigeria, we announced in December that we have completed the buyout of Airtel Networks Limited, our Nigerian subsidiary. This has resulted in the group now owning 99.96% of our largest subsidiary after paying $147 million for the 8.22% minority holdings. Regarding the NIN/SIM customer regulations in Nigeria, the deadline for finalising the regulation has been deferred multiple times since December 2020. It has been deferred to end of March 2022 now. We continue to make further progress in capturing NINs and verifying these with the National Identity Management Commission, NIMC. But a lot of improvement is still required in the connectivity for all operators, not only us, with the National Identity Management Commission database.

We have also made further progress on our asset monetisation and investment opportunities for the group. We announced the first closing of our tower sale in Madagascar in November, for which gross proceeds would be around $52 million, and after the quarter ended, in January this year, we also announced first closing of our tower sales in Tanzania for the receipt of an initial $159 million of the $176 million gross proceeds. Out of this $176 million gross proceeds, $60 million will be used to invest in network, sales infrastructure and for distribution to the Government of Tanzania as one of our shareholders.

We also received $125 million further proceeds from the second closing of the mobile money minority investment transactions with the Rise Fund, MasterCard and Qatar Investment Authorities in November of last year. We are also able to announce Chimera as an additional investor, putting $50 million in early December. In total we have received $550 million from the minority stake sales in Airtel Money.

Finally, in November of last year we launched our sustainability strategy during our half year results. | am very pleased that we were able to unveil our five-year Pan-African partnership with UNICEF including financial and in kind contributions of $57 million. We are working with UNICEF to accelerate the rollout of digital learning connectivity and free access to learning platforms across 13 of our 14 countries.

By providing equal access to quality digital learning, particularly for the most vulnerable children, our partnership will act to ensure that every child has the opportunity to reach their full potential. Despite the COVID-19 pandemic seemingly diminishing in terms of impact on our reported results, we