Airtel Africa Plc

Good day, ladies and gentlemen, and welcome to the Airtel Africa nine-month results call. All participants are currently in listen-only mode, and there will be an opportunity for you to ask questions later during the conference. If you should need assistance during the call, please signal an operator by pressing star and then zero. Also note that this event is being recorded. I will now hand the conference over to the CEO, Shagan Ogunsanya. Please go ahead, sir.

Thank you. Thank you for joining us on today's call. I'm joined on the line by our CFO, Jaydeep, and our Deputy CFO and Head of Investor Relations, Pierre. We'll be shortly answering your questions, but first, I would like to provide you with a very brief overview of the performance in the last nine months. Over the period, we have reported a strong set of results despite the global macroeconomic backdrop revenues went up to $3.9 billion, with a 17.3% growth in constant currency terms. Adjusting this for Nigerian voice called Barin and Sela Hotawath, the organic revenue growth was 20.6% over the period. In Q3, the quarter ended December, our constant currency revenue growth was 18%. Despite the inflationary challenges, we have delivered an ambition to maintain stable margins as our EBITDA margin slightly increased to 49%, giving us an EBITDA for the period of $1.9 billion, an increase in constant currency terms of over 17%. It is important to highlight that while we did see some effects over the period, we continue to report double-digit growth of both revenues and EBITDA in reported currency. Before discussing our performance across our two main reporting segments, I'd like to highlight our performance on a regional basis, our three regions, including both mobile services and mobile money. In Nigeria, we continue to see strong trends with constant currency growth of almost 21% in the period and 23.1% in Q3. In East Africa, we reported more than 16% revenue growth in constant currency, with the Francophone region growing 12.7% in constant currency as well. Let me begin by focusing on the performance of the mobile services segment. The strong demand for services across our 14 countries, combined with a very attractive consumer-focused proposition and distribution infrastructure, drove a 10% increase in the customer base, with quarterly net additions at the highest level in over eight quarters. Up a grade of 5.9%, and the customer base increase supported mobile services revenue of 15.9%. We remain confident that the very low unique customer penetration levels across our footprint combined with very low usage levels mean there remains a long-run way for both voice and data revenues to grow across all the three regions. In Nigeria, mobile services revenue grew 21% over the period, while in East African and Francophone markets saw almost 12% growth in constant currency. Let me further break down the performance of the mobile services segment between voice and data. For voice services, revenue growth of 12.7% was supported by growth in customer number alongside a further increase in voice output as a result of increasing usage per customer, supporting our view that usage level across African countries remain very low compared to our global peers. For data services, the penetration of service remain very low across the 40 markets as well. This combined with a sustained focus on network coverage and capacity has contributed with 13.6% growth in data customers. data customer and data output growth contributed to a constant currency revenue growth of over 22%. Only 70% of our total customers and 46% of our data customers are using 4G, highlighting the opportunity for sourcing growth in data services going forward. As a result of the very strong revenue performance, and despite the financial pressures on our cost base, particularly fuel costs in Nigeria, mobile services in Sibida has seen a very encouraging growth of almost 15% in constant currency with continued margin resilience at 49%. The mobile money business continues to see very strong performance with almost 30% constant currency revenue growth in the period. It is the fastest growing mobile money business across the continent. We continue to see expansion of our customer base, which increased by 22% as the principal driver of growth. Outside of Nigeria, which is very early in the mobile money journey, the penetration of customer base increased almost 35%. With increased use cases and continued customer engagement, transaction value per customer increased 13%, resulting in Q3 annualized transaction value of almost $100 billion. Following the PSB launch in Nigeria, we continue to focus on building the brand, and we invest in technology and platform to develop trust and confidence in our consumer propositions. We remain of the view that to invest in the tech platform and systems ahead of revenues is the best strategy for long-term value creation. Overall for the group, we continue to see margin resilience despite the very challenging operating environment in many of our markets. We have continued to focus on cost reduction and operating efficiencies to limit the impact of inflationary pressures on our cost base, resulting in a 20 basis point margin increase over the year in reported currency. Over the year, foreign exchange changes have had an advanced impact on our reported financials. The biggest drivers of FX weakness related to the valuation impact in Nigeria, our largest market, Central African franc, Malawi, Kenya, and Uganda, This is partly offset by their position in the Zambia question. Adjusting for their first losses within our finance line, our EPS, before exceptional items, increased 21.6% over the year, reflecting our strong operational execution across the 14 countries in the group. Briefly, in terms of the balance sheet and cash flow, at the end of December, our leverage ratio was 1.5 times bigger, with net debt of $3.6 billion. The leverage ratio has increased slightly from 1.3x at the end of September 2022, reflecting the recent acquisition of Spectrum, particularly 5G Spectrum in Nigeria. Our capital allocation policy remains unchanged. Our priority is to continue to invest in the business to ensure we future-proof our operations for sustained growth and we therefore reiterate our previous keepers' guidance of between $700 million and $750 million for the current financial year. We also remain committed to further strengthening our balance sheet by reducing foreign currency debt while continuing to push debt down to the OCO level. Earlier this year, we redeemed $450 million of OCO debt in advance, and we will continue to focus on reducing this debt further as we continue to upstream cash from our various subcourts. Over the last nine months, we have prioritized investment in our network to enhance coverage and network quality. Almost 90% of our capex is targeted towards growth initiatives. In addition, we have also enhanced our spectrum footprint across a number of key markets. In particular, In January, we announced the acquisition of 3.5 and 2.6 gig spectrum in Nigeria, which will be used for 5G rollout and increased 4G capacity. This spectrum and other acquisitions in Kenya, DRC, Tanzania, and Zambia will provide significant capacity for us to accommodate continuous strong data growth by supporting both 5G rollout and 4G expansion. Before we open to Q&A, I thought I would highlight that what I see, what we see, to be the five reasons why the opportunity at Airtel Africa is so attractive. Number one is the very strong growth outlook. Our markets across Africa continue to show significant opportunity for growth, which is reflected in the rapid uptake of good voice and data services. This, overlaid with a significant mobile money opportunity, including the rollout of PSB in Nigeria, gives us significant confidence on the sustainability of growth in the coming years. Secondly, our relentless focus on efficiencies and returns will ensure that the flow-through of revenues will continue to drive profitable growth. Despite the macro environment, we'll continue to deliver immediate margin resilience across the globe in the short term. Thirdly, Our confidence in the growth outlook has focused our attention on future-proofing the network, and our recent investment in Spectrum will ensure network reliability, further improve customer experience, and enhance our brand, which will be key to monetizing this growth opportunity. And number four, our robust risk management framework, our corporate governance strategy, is aimed at mitigating risk, which we're exposed to. Our track record speaks for itself, and we maintain this vigorous approach to drive continued shareholder value. And finally, our sustainability agenda, which is based on a very strong belief that profitability and sustainability are not mutually exclusive. And with that, I would now like to open the line for questions, for which I'm going to be joined by Jadeve and Pierre. and I invite you to start the Q&A session.

Thank you very much, sir. Ladies and gentlemen, if you do wish to ask a question, please press star and then one on your touchtone phone or on the keypad on your screen. You will hear a confirmation tone that you have joined the queue. If you wish to withdraw your question, please press star and then two to remove yourself from the queue. Our first question is from Jonathan Kennedy-Good of J.P. Morgan. Please go ahead.