Airtel Africa Plc

Good day ladies and gentlemen and welcome to the Airtel Africa full year results call. All participants will be in listen only mode. For the participants on the webcast, please type your questions in the webcast question box. For the participants that have dialled in, there will be an opportunity to ask questions later during the conference. If you should need assistance during the call, please signal for an operator by pressing star and then zero. Please note that this conference is being recorded. And I'd like to turn the conference over to Mr. Shegun Ogunzanya. Please proceed, sir.

Thank you. Hello, everyone, and thank you all for joining us today. As always, I have with me J.D. Group CFO, RPF, who is there for Investor Relations. Let me give you some brief highlights of the year and update you on strategic vision and priorities before handing over to JD to run through the results in detail. This year, our business and economies where we operate have faced considerable challenges, but our business has managed much stronger. We have seen considerable progress on our priorities, as we continue to deliver strong revenue growth and maintain our very high margins despite significant inflationary pressure. This profitable growth has allowed us to not only continue investing to support future growth potential, but also to further enhance our capital structure through a very disciplined capital allocation process. As our business grows, we continue to create value for all of our stakeholders. We create more jobs, directly or indirectly. We pay more tax. We invest in infrastructure that is key to the development of these nations' economies. We continue to bring communities closer and give them the opportunity to access affordable financial services, sometimes for the very first time. This enables us to further increase returns to our shareholders. From a strategic perspective, Our focus has been on investing in the future growth potential our markets offer, which includes 5G spectrum, as well as investments into fiber and data centers. In Nigeria, our largest market, we've also continued to invest aggressively. We've launched a mobile money service called Smart Cash, which will support increased financial inclusion across the country, and it will supplement future growth. Operationally, we continue to expand our customer base, grow our Apple, and increase 4G network coverage. Both mobile money and data continue to be our growth engines, although voice continues to grow double digit as well. Financially, I'll let you talk through the details, but at a very headline level, We continue to deliver double-digit revenue growth in reported currency and associated EBITDA margin despite the inflationary pressures. We continue to strengthen our balance sheets and the board has recommended a total dividend of 5.45 cents for the full year. This is a reflection of a very solid trend. The momentum while our sustainability strategy remains unchecked and it continues to be embedded in everything we do. It will be very helpful to provide some context around our very strong operational performance. But let me start by reminding you that our industry is not immune to the macro and geopolitical challenges across the globe. However, We have adopted various initiatives to mitigate against those challenges. Consumer spend remains impacted by high inflation. However, with affordable and transparent offerings, we continue to see consumer growth and higher usage driving strong constant currency revenue growth in our portfolio. On inflationary pressures, especially a rise in energy costs, This has been particularly challenging for our cost base, but we continue to focus on cost optimization, allowing us to report a resilient margin performance. Currency volatility across the region is not something new. Now it's something we can control, but our strong constant currency performance has ensured double the reported revenue and EBITDA growth. And finally, Despite the first liquidity challenges across some of our markets, we've been very successful in upstreaming over $1 billion of cash from our up-cost to de-risk our balance sheet. Let me now update you on our strategic priorities and our achievements that are light of the strategies working for us. to stop putting our business in the contest by reflecting on the opportunity our various markets offer. This slide captures the key drivers of Airtel Africa's future growth potential. The demographics are in our favor. Combined with the low level of SIEM penetration, we continue to support the growth in our customer base. And as usage of the key services continue to develop, this will support continuous strong revenue trends Importantly, the mobile money journey is still at a very early stage across all of our markets, especially in Nigeria. As a group, we're very clear on how we will continue to capture this growth. Our win-win strategy has consistently delivered on our performance to date, and we don't anticipate this changing in any way. Additionally, execution has to be successful, and the last 21 consecutive quarters of double digital revenue and EBITDA growth has shown that as an organization, we have the right framework and mindset to continue delivering. The chart above, chart number nine, reflects our growth algorithm, which has supported operational success historically, and we continue to underpin our growth aspirations in years to come. As customers increase and use cases continue to develop, so Apple and revenue growth remains very strong. Our forecast of costs allow us to drive strong efficiencies, which combined with operating leverage drives strong free cash flow generation, which is then used to invest for the future. and to sustain further customer growth. This cycle will continue to sustain our strong operating momentum in future. Slide number 10. This algorithm is depicted on the previous slide. It's reflected in a delivery of double digital revenue growth across all service offerings, voice, data, and mobile money.

Slide 11 shows our group strategy. The six wins.

There are six pillars which are designed to capture the great opportunity as a way to transform lives in Africa. Our strategy is clearly working. However, we continue to seek ways to enhance our service offerings to enable sustained growth and create value for all of our stakeholders. The next slide I'd like to show you our strategy in action. The first one is win with distribution. Slide number 12. Here you can see how we have continued to extend both our exclusive and non-exclusive distribution channels significantly over the year. Our primary objective is to increase the scale of our distribution, reduce friction, and get very close to the customers. to support rising usage and revenues. We have almost 1.8 million touchpoints for our customers, which have reached 140 million customers across our 14 markets. A focus on digitalization is important to improve the customer experience and reach. We put great focus on giving the opportunity to both recharge and onboard digitally. The next slide is an example of what we've done in Zambia using this distribution pillar. We have seen constant increase in the agent network, and the very strong partnership with the trade has made Airtel the go-to brand. resulting in a 40% increase in distribution points and an almost 50% increase in retail money agents, driving a 15% growth in customers and over 30% growth in revenues.

Next slide, when with technology.

The focus for this pillar is on increasing capacity to sustain customer experience, increased coverage, and start future-proofing our network through massive MIMO, and importantly, 5G. This is all underpinned by best-in-class IT infrastructure. We have continued to add new network sites. We've added about 2,700 in the last year, with over 1,000 of these in rural areas. And we have maintained our focus on modernizing and increasing capacity, with over 90%, 9 out of 10 sites on 4G. with a rollout of over 6,000 kilometers of fiber, with a total of over 70,000 kilometers of fiber deployed across our network. In addition, we've been investing in new data centers as a way to further enhance the future growth potential across our markets. Slide 15 shows our technology strategy in action in our largest market, Nigeria. Through focused planning and with a continued focus on efficiencies, we have spent over $600 million on network investment and spectrum over the last year to increase capacity, enhance coverage, and future-proof the business with selective 5G deployment. Despite usage on our network being 44% over the last year, the strong customer experience remains intact with a peak hour data utilization rate of only 50%. This has enabled Nigeria data revenue growth of 20% in constant currency. Turning to slide 18, it speaks to our data strategy. Our technology strategy continues to support our win-win data strategy. Using single-run technology and with increased fiber rollout, we have deployed a network with significant data capacity. We have generally invested in 4G IDFA peers. And across the group, over 90% of our sites are now 4G capable. When combined with our smart, affordable, and transparent data bundle of us, customer data usage was up almost 30%, driving a 46% growth in data traffic across our network. In DRC, we represent a great example of our data strategy in action. This is evidenced by this slide, which shows how despite increased pressure on consumer spend, like you've seen in almost all parts of the world, our competitively priced data offerings combined with 4G network coverage expansion drove our 4G customer base up by almost 40%. This contributed to a 63% increase in the total data traffic carried across the network, making us

the leading data provider in BRC.

Turning to slide number 18, where we describe our mobile money strategy. The lack of traditional bank infrastructure in our markets means that the number of customers who are able to access traditional banking services is far lower than even the numbers who have bank accounts. Our focus remains on building this distribution network increasing the use cases, and ensuring the reliability of the platform. This focus has resulted in a 27% increase in our exclusive distribution channel, meaning our money branches, mini shops and kiosks, and also our multi-brand agents by over 44%. The traction with customers is clear, with continued Apple growth and annualized transaction value of over $100 billion in Q4 of 2023. Uganda is a great example of our strategy to enhance the use cases. We already have a very strong and large mobile money business in Uganda. This has been further strengthened by the launch of a quick loan product, which provides an instant loan to cover a payment shortfall. And it appears to be a broad range of customers It's been used by more than 250,000 customers with a transaction value of about $8 million a month by March of this year. This was one of the many use cases that contributed to revenue growth of over 20% during the financial year. The next slide, slide number 20, summarizes the success of the previous two slides that I've shared with you. a 20% growth in customer base, combined with 40% plus growth in the transaction value as use cases expand, has resulted in 30% revenue growth for the mobile money. With this level of growth, and a high margin of almost 50%, the opportunity for us to add additional value over and above what other telecom players in the industry can deliver remains very significant. Slide 21 shows the continued evolution of our mobile money ecosystem. We still see the digital wallet cash-in and cash-out services as a major source of mobile money revenue. And as if it would grow potential for this from a business penetration with new customers. But there is also a continued diversification of the business towards additional payment solutions and also more sophisticated financial services. like insurance, loans, investment, and stock trading. And slide number 22. I learned the opportunity from a new PhD license in Nigeria, where we are very strongly positioned. We have made significant progress over the year, where we have prioritized investment into the reliability and trustworthiness of the systems and product offerings. As our confidence around the platform stability has increased, we have accelerated our investment into the distribution network, and we have seen some initially encouraging performance with 12 million wallets upon and over 600,000 active customers. Given the early stages of this rollout, we are prioritizing investment into the system and customer acquisition before revenues. The key for analyzed transaction value for the PSB business is approximately $430 million, suggesting a significant opportunity as the product gathers momentum. Our strong presence across the market allows our investment into funding the distribution network positions as well to maximize the opportunity available to us. The next slide. is our win-with-people strategy. Our values and culture continue to be very critical to our ability to deliver on our business strategy, and this is underpinned by a strong governance culture. I'm particularly pleased with the improvements in gender diversity, and we continue to strive to make further progress on this agenda. Now, on sustainability. before I turn it over to Jadeve. I've been particularly pleased with the progress we've made on our sustainability journey. Following the launch of our first report in October last year, we have made significant progress in two key areas. Number one, we have launched a UNICEF partnership across six of our coasts. It's eventually going to cover 13 countries, but we have launched six already, providing free educational resources to over 250,000 children this year. This is beginning with the aim to provide these services free of charge to more than 1 million children by 2027. Secondly, we have done considerable work on our emissions reduction plan, and I'm encouraged that the work has shown our 2015 net zero ambition to be achievable and be supported by specific decarbonization initiatives that would enable substantial reduction in emissions intensity of over 60% by the year ending 2032. This slide outlines the progress across all of the four pillars of our strategy, the pillar of business, people, community, and environment. And I look forward to continuing reporting on this very important strategy, which underpins everything we do. to review our financial performance.

Thank you, Shagun, and good morning and good afternoon to all of you. Let me start with the key financial highlights. Slide 26. On overall terms, we have delivered a good set of results. We continue to expand our customer base by 9% year-on-year to reach 140 million customers. This helped us to continue our revenue and EBITDA growth momentum Revenue growth for the full year was 17.6% with Q4 growth accelerating to 18.6% in constant currency. Underlying EBITDA grew by 17.3% in constant currency to reach $2.6 billion of EBITDA. Margin 49% flat year-on-year despite inflationary cost pressure. Operating free cash flow at $1.8 billion was up by 10%. Leverage at 1.4 times was broadly stable. Despite $500 million of spectrum investment during the year, the board has recommended a final dividend of 3.27 cents per share. Therefore, the total dividend for the full year will be 5.45 cents per share, up 9% from last year, in line with our dividend policy. Coming to next slide, all of our key service segments of voice data and mobile money grew double-digit in constant currency. Revenue in reported currency grew by 11.5%, while constant currency revenue growth was 17.6%. The differential in growth rate was due to currency devaluation, mainly in Central African franc, which is largely paid to Europe, the Nigerian Naira, Kenyan and Ugandan shilling, and Malavian kocha, partially offset by appreciation in Zambian kocha. Coming to the next slide on the segment performance. First, Nigeria, revenue grew by 20% supported by both customer-based growth of 9% and ARPU growth of 7% despite the impact of cash shortage in the country in Q4-23 due to demonetization. Voice revenue grew by 30.4% driven by customer-based growth and stable ARPU despite NIN impact in the first quarter of the year. Data revenue grew by almost 28% contributed by 17.3% customer base growth and almost 10% growth in data output. We further expanded our 4G network with 99% of our sites in Nigeria are on 4G. This resulted in usage per customer growth of almost 25% while 4G usage per customer grew by almost 50%. Evita margin at 51.3% dropped 423 basis points as a result of rising fuel prices and increased inflation. Coming to East Africa, revenue grew by over 17%, driven by double-digit revenue growth in all three services of voice, data, and mobile money. This revenue growth was supported by customer base growth of around 10% and ARCU growth of 9% to reach $2.7 per customer per month. Voice revenue grew by 12.2% driven by customers as well as ARPU growth. Data revenue grew by almost 23% driven by 20% growth in customer over 9% growth in data ARPU. We further expanded the 4G network across the region. 47.3% of total data customer are 4G customers up from 40.5% of the last year. Mobile money revenue grew by 32.6% driven by over 80% growth in customer base and around 10% ARPU growth. Underlying EBITDA margin was 53.3%, expanded 193 basis point as a result of revenue growth and cost efficiencies. Coming to francophone Africa, revenue grew by around 13% in constant currency, while reported currency revenue growth was 6.2%. As mentioned, the difference in the growth was largely on account of devaluation in Central African franc which is largely pegged to Europe. Customer base of around 29 million, up 7.8% year-on-year, while ARPU grew 3.8% in constant currency to reach $3.7. Voice revenue growth was around 9%, driven by customer base growth. Voice ARPU was largely flat due to decline in interconnect rates in Niger and Congo Bay. Data revenue grew over 16%, was largely driven by over 9% growth in customer base and around 8% growth in data output. Mobile money revenue grew over 20% due to 18% growth in customer base. Ebitda margin at 46.6% improved by 220 basis point. Adjusting 19 million one-time office benefit that we had during the first half of the year normalized full-year EBITDA margin for francophone country was about 45%. Next slide. We show group underlying EBITDA growing by 11.4% in reported currency to almost $2.58 billion. Underlying EBITDA has been adversely impacted by $133 million as a result of currency devaluation in multiple of course, including Nigeria. The underlying EBITDA margin was at 49%. flat year-on-year, despite rising energy costs and increased inflation across geographies. The impact of the fuel price increase was $245 million per full year, out of which $215 million was in Nigeria, and we managed to offset most of this impact through operational efficiencies alongside discipline cost control in various other areas. Next slide. As you can see, we have a strong track record that reflects a very efficient operating model that has driven margin expansion over the last four years. We continue to focus on margin resilience as we move to next financial year. Next slide. Let me spend a few minutes discussing the finance costs as I'm sure it has an area of interest for all of us. As you can see, finance costs excluding foreign exchange and derivative loss was higher than last year, reflecting the higher interest on lease liabilities and other finance charges. The largest impact on a year-on-year basis was $2.5 million increase in foreign exchange and derivative losses arising from currency devaluation, which resulted in the restatement of foreign currency denominated debt and liabilities. As you can see in the chart on the right-hand side, this includes losses on revaluation of bank debt, lease liabilities, creditors, shareholder liabilities, and derivative losses. We are actively working to reduce the impact of this currency devaluation on our income statement. Firstly, we are moving U.S. dollar debt into local currency debt at the operating company level. 64% of the Opco market debt is now in local currency, and we continue to focus and keep converting the foreign currency loan into the local currency loan. Secondly, these liabilities are paid in local currency, but about 50% of these liabilities are paid to the US dollar. We will continue to work with our tower companies, our partners to reduce this further. For creditors, we have been working with our partners to move some dollar CapEx to local currency CapEx. And finally, as we continue to upstream cash from the operating companies, we will look to reduce the shareholder loan across various geographies. Going to the next slide. Operationally, we are happy with our performance with double digit growth in revenue and operating profit. However, forex has impacted our EPS after normalizing the net impact of this forex and derivative losses. The EPS before exceptional item would have been 20.6 cents an increase of over 13%. However, the forex and derivative loss has adversely impacted the EPS. Basic EPS was 17.7 US cents in FY23 as compared to 16.8 US cents in FY22. EPS before exceptional item was dropped to 13.6 in FY23 as compared to 16. And that is because of the forex and derivative loss. Coming to next slide. Our capital allocation policy remains unchanged. As mentioned earlier, our priority remains to invest in the business and at the same time, aim to further strengthen the balance sheet. CapEx guidance for the next year is slightly higher, between $800 and $825 million as compared to the last year. This includes data center CapEx of roughly about $40 million. Secondly, to return cash to shareholder in a progressive dividend policy. And the board has already recommended a final dividend of 3.27 cents per share, which is a total dividend for the full year, 5.45 cents, which is up by 9% as compared to last year in line with our dividend policy. Slide 36, we continue to invest in future growth. We have invested $748 million in FY23 intangible CapEx during the year. In addition to this, we have also acquired Spectrum in Nigeria, Kenya, DRC, Zambia, Tanzania for an investment of about $500 million. Eighty-seven percent of our CapEx investment is geared towards growth initiatives, which combined with Spectrum purchases ensures a strong and reliable network for the future We have also rolled out 6,000 kilometer of fiber network in last one year, resulting into 70,500 plus kilometer of local fiber network. Coming to the normalized free cash flow, during the year, we have generated $121 million of cash from operations, post-tax, and interest payment. Our cash cap expense were higher by $70 million. Lease liability payments were higher by $28 million. And non-controlling interest, was higher by $27 million. Hence, our normalized free cash flow before spectrum investment was largely stable as compared to the previous year despite the forex segment. Further, $472 million of increased spectrum payment was due to the total $500 million spectrum investment in current year. Hence, our normalized free cash flow for the full year was $82 million. The next slide, our investment decisions are made only if they are following a stringent return on investment criteria, which is clearly reflected in the trend of our return on capital employed, highlighted in the chart. Our ROCE has improved 101 basis point during the year and almost seven percentage point in the last two years to reach 23.3%. Coming to our balance sheet, we continue to strengthen our balance sheet by firstly, reducing our foreign currency debt, especially at Holco. We have prepaid bonds of $450 million over the last 12 months as a result of strong cash upstream from our Opcos. As you can see, our upstreaming potential is very diversified across our region, not making us overly reliant on one specific region. Secondly, our Opco market debt increased by 29% to over 1.6 billion, in line with our strategy to push down the debt at the OPPO level. Group leverage at 1.4 times has remained largely stable compared to last year, and this is in spite of the fact that we invested about $500 million in the spectrum. The total weighted average interest rate was 7.7%, vis-a-vis 5.6% in the last year due to increase in the base rate, increase in local currency OPPO debt, and the repayment of Holdco bond, which had a lower interest rate. I will now hand over to Shagun to conclude the presentation. Over to you, Shagun.

Thank you, Yadav. And finally, from me on slide number 41, a few words on summary and outlook. As I've seen from our results, our focus has contributed to strong operational and financial performance. And we continue to demonstrate positive developments on nearly every key metric. Our net-term focus will be on investing in our network and further expanding our distribution to be closer to our customers, while at the same time building new services for future growth, such as the TSD opportunity in Nigeria, as well as ambitions for data center growth and fiber rollout. We remain mindful of the correlation and repatriation risks, which are largely outside our control. But our results continue to demonstrate the effectiveness of our strategy and our strong execution bias. The growth opportunity remains very intact. And we see ourselves well positioned to deliver against this growth with a continued focus on individual margin resilience. And with that, I would like to thank all of you for your attention today. I would now like to open the floor for questions. Thank you.

Thank you very much, sir. Ladies and gentlemen, for the participants that have dialed in, if you'd like to ask a question, please press star and then 1 on your touchtone phone or on the keypad on your screen. If you decide to withdraw your question, please press star and then 2 to remove yourself from the list. For the participants on the webcast, just a reminder, if you want to ask a question, please type your questions in the webcast question box. We will pause to see if we have questions. The first question comes from Jonathan Kennedy Good from JP Morgan. Please proceed with your question, Jonathan.

Good afternoon, and thank you for the opportunity to ask questions. Quick question on Nigeria. Just obviously a solid result there, but trying to understand whether you will push for price increases given stubbornly high inflation rates there. So perhaps some color on what you think the government may allow there. And then also of the $1 billion that you upstreamed, can you tell us how much of that was in the fourth quarter and how much came from Nigeria? And then finally, in terms of the mobile money potential value realization via listing, Is that kind of on the back burner for now, or can you talk to a timetable for that, given where we are in terms of the market cycles at the moment? Thank you.

Thank you, Jonathan. I'm going to take the last question first on the mobile money listing. About two years ago, we said we're going to list the mobile money business in four years' time. So three years down the line, we're still committed to that deadline. Nothing has changed, so we're still committed to listing our mobile money business in three years' time. So that is a commitment we're giving, and we're standing by that commitment. On your second question about the patrician from Nigeria, overall, we've done about $1 billion from different countries in our territorial portfolio. Over 360, 370 billion of that came from Nigeria. And that is a fact. In terms of how much we took out in fourth quarter, I will get back to you on that. But as I speak now, 1 billion 370 out of that came from Nigeria. You spoke about price increase. Price increase is regulated in Nigeria. We've got a different philosophy around revenue growth and around EBITDA. We I have the philosophy of growing our revenue by growing customer base and growing customer usage. So our philosophy is to get a lot more customers, get them to use a lot more force for voice, a lot more minutes, a lot more data, a lot more money. That's according to our own growth. And despite the fact that we were asked to reverse a price increase, we took a deal three, we see grew revenue in Nigeria by 20%. voice and data. So price increase will be welcome. We continue to work with the regulators on what will let them approve a price increase. But that's why the fact that we don't have a price increase, we've got our own pillar of growth, which is, I mean, expand your customer base, let them use the network for more voice, more data, and eventually more mobile money. And that's how we've done. We've grown in the last couple of quarters. That's how we're going to continue to grow. In terms of emittance in the last quarter, Jadid would give us a figure.

Yeah, so Jonathan, in Q4, we have upstreamed in total $304 million, out of which $150 million was from Nigeria. The full year, we have upstreamed $1 billion, out of which $388 million from Nigeria.

Thank you very much. That's really helpful. Thank you.

Thank you. The next question comes from Maurice Patrick from Barclays. Please proceed with your question, Maurice.

Yes, thanks for taking the question. I'll just ask a couple, please. First question on Spectrum. So you've spent half a billion dollars this year on Spectrum, mostly in Nigeria. Just could you update us in terms of what visibility you have on other Spectrum auctions coming up in the next 12 months? First question. And the second question, we've had lots of noise on mobile money around new entrant disruption and Wave made lots of noise. It feels as though some of that new entrant disruption seems to be going away. I was just curious for an update from you guys in terms of how much competition you're seeing from new entrants in that space. Thank you very much.

Thank you, Maurice. Let me take the second one first. In terms of WAVE, I mean, WAVE came like a wave, but we're not seeing any more WAVE. So I'm just not sure how sustainable that model is. They did very well in Senegal. I've not seen that replicated anywhere. And then they came to Uganda, and we took the fight to them. So that's how much about WAVE. We've got a very different model for growing mobile money. It's based on the distribution infrastructure that we've built over the years. On top of that, we've got a captive MEBase for our mobile money business. From that captive base, we're able to convert customers to mobile money. And we have three layers of services we offer. We offer mobile wallet, we offer payments, we offer financial services. These are clearly distinctive, and I'm just not sure how any FinTech can replicate any of what we've done, given the resources and the advantages we have. So, we're good in terms of mobile money. I can see this in Uganda, where we're competing against the mobile operator and against Wave, and in other countries in East Africa. Talking about Spectrum, we spent half a billion dollars on Spectrum last year. We bought Spectrum in Nigeria. We bought it in Zambia. We did Tanzania. We did Seashell. And Kenya and DRC as well. So close to half a billion dollars. And a couple of days ago, we renewed our 3G license in Nigeria. Paid another $120, $130 million to renew the 3G license in Nigeria. I don't expect any major flow for Spectrum for license renewals this year. The major part of the $100 billion we spent last year was from Nigeria. The 5G Spectrum was about $285 million. That was a big chunk of the money. On top of that, we also bought additional Spectrum in 2.6 gig in Nigeria. So almost $300 and something million of that activity.

Thank you very much.

Thank you. The next question comes from Cesar Turon from Beaufort. Please proceed with your question, Cesar.

Yes, hi. Good afternoon. Thanks for the opportunity to ask questions. I have two, if that's okay. The first one would be on CapEx for 2024. Do you have any formal guidance or recommendations Can you please tell us if CapEx in dollars is likely to be higher or lower than what you spent in FY23? And then the second question would be on 5G in Nigeria. Can you please mention how far are you in the rollout and how many sites you intend to invest? to have 5G enabled, let's say, in the next two to three years, and if you believe that there is a use case for fixed wireless solutions in Nigeria for 5G. Thank you.

I'll just give you a top overview of the KPIS, and today we'll give further information on the KPIS. We did about $750 million last year. This year, we're looking at $825 million in place contributions. additional money we want to spend on data centers. Data centers in Nigeria and data centers, I mean, in Mombasa, Kenya. And that explains, I mean, the increase from the $740 million, $750 million spent last year on CAPES. On 5G launch, we continue to invest, I mean, for future growth of our business. And 5G investment, the 5G spectrum we've got across much of the countries, is a reflection of our belief in the future potential of 5G. In the short term, we will continue to deploy 5G. We have, I mean, very limited use cases in the short term. And the focus is on how we can use 5G to deliver broadband. Remember, in Africa, fiber broadband is very limited. So our focus is, how do we use 5G to deliver broadband to homes and small businesses? That is one use case. But the bigger use case for mobile devices is still very limited now, given the very low penetration of 5G devices and the relatively high prices of 5G devices. As soon as it becomes cheaper, we expect a deeper penetration of 5G devices, and I like to believe that I mean a lot more consumer discretion to follow but for now we find this for the future in a short time we're going to use the 5G to deliver broadband and the initial focus is launching of 5G in select neighborhoods select neighborhoods in select cities basically we're looking at key cities of Africa Lagos of course is one we're looking at You're looking at DRC, you're looking at Uganda, but just very major cities in each of those countries. And when we're talking about major cities, we're also talking about the very inflation neighborhoods. phone, is it immediate? No. Is it the right thing to do to prepare for it? Yes, background is limited. Don't buy it now. You're not going to find it to buy when you need it anyway. So we just decided to buy it ahead of the opportunity that comes up.

Okay, so on the CapEx, let me give you a little bit more detail of the CapEx. Firstly, for next year, our guidance for CapEx is between $800 and $825 million. Out of which, about $40 million we have earmarked for the data center buildup into two countries, Kenya and Nigeria. So, the balance of the CapEx largely will be between network, IT, sales and distribution, and air term money. A large part of the CapEx, I would say about $600 odd million, $650 million will be network, network, rollout, expansion, capacity build, fiber, etc., about in IT, there will be an IT infrastructure investment, plus IT infrastructure investment, about $75 and $100 billion. And of course, we have a distribution expansion, the kiosks, the branches, the hands, you know, the KYC devices, and so on and so forth. So, broadly, that's the way our CapEx is to be built up for next year. And overall, it will be between 800 to 825, including the data center. And roughly about 65 to 75, 70% of our capex is dollar paid. So that's broadly about, if I take 70% of 800, that's about 555, $60 million will be dollar paid.

Great. Thank you so much.

Thank you. The next question comes from Rohit Modi from Citi. Please proceed with your question, Rohit.

Thank you for the opportunity. Just two questions from my side. Firstly, on the mobile money in Nigeria, if you can share any internal targets you have when you start generating revenue from the mobile money side in Nigeria and also any KPIs that you can share at this moment in terms of how many agents and merchants you have already on board and what's the current status on that side. Secondly, when you talk about margin resilience, can there be more color between the geographies? You saw a decline in margins in Nigeria, and it was much better in East Africa and Francophone. Is that the kind of mix you will see next year as well in terms of the substantial increase in margins in those two regions, and then again, Nigeria will go further down? And also, if there is a potential price increase that happens in Nigeria if allowed by the regulator. Do you see an upside risk to a margin revealing guidance in that sense? Thank you.

Thank you, Rohit. On the mobile money business, like I said in my opening remarks, we're prioritizing customer acquisition ahead of revenue growth. And that I'm confident was the right path. In terms of KPIs, We've acquired about 600,000 active customers. We've opened over 12 million wallets. Out of these 600,000 of them are very active. In terms of the agent network that is required for flow, for cash, for acquisition of customers, we've registered about 125,000 customers as of end of March. out of which 52,000 are active. So the key figures are one, active wallets is 100,000. Total number of wallets is 12 million. Two, number of pages, 125,000. 52,000 are active. And in terms of transaction value, if I'm to analyze the Q4 transaction value, it's looking like $500 billion. So Q4 times four. Transaction value that went through our chain is $500 million. And in terms of when we go to make money, I mean, the tick rate in Nigeria is relatively low. It's about 0.3% compared to 0.5, 0.6, 0.7 in other countries where we operate in. But remember, it's also a very large country with very, very many potential customers. But the algorithm for us in the first week when it's just continuing But we're very optimistic that it's going to be a better pitch into our portfolio. Now, talking about the margin picture, we've got a portfolio of countries, portfolio of regions. Nigeria is, of course, a region and it's a country. We've got a contraction in margin in Nigeria, but we have expansion into other regions. East Africa expanded, West Africa expanded, and that helped us minimize the impact on the group EBITDA. As I've said earlier, EBITDA is more or less stable at 49%. Despite the huge headwinds we had on FWEL, headwinds on Northern Asia, we still delivered stable EBITDA at 49%. Daddy, do you want to add more information?

Yeah.

Before I take that, should we address the price increase question? On the price increase, once again, pricing is regulated in Nigeria. We continue to engage regulators that, given the level of inflation in the country, given that we surround the currency, we require pricing to really maintain the health of the industry. But beyond this, we're very, very committed to our own growth algorithm. which is using customer-based expansion, growth increase in usage, talking about consuming more minutes, voice, consuming more data, megabytes. Those are the two clear pillars we use for growing our revenue. Onboard more customers, let them use more voice, let them use more data. And, of course, the pricing comes in sweet now. With that pricing, we've delivered 20% growth in Nigeria in constant currency, and I think double-digit growth in reported currency as well. So we've got a formula that works for us in Nigeria. And in terms of e-data, and I'm sure that you'll give more color to this, we have, I mean, a simple philosophy around stable margin as well, that for every $100 we add to our top line, at least between $50 and $55 formula that I made, we work very dearly and we do everything possible to maintain that formula. Between 50% and 55% flow through from top line to middle. Maybe, Jadid, you want to... Yeah, so...

So she will mostly have covered this. So just one couple of points I want to add that last year, just to remind you, we have got impacted by about $245 million due to fuel price increase and largely in Nigeria because our dependency on fuel or the DG or generator in Nigeria is higher than any other country because of the shortage of grid power availability. So while fuel price has also happened in some of the East African countries, However, East African country, we are fortunate that the grid power availability is much higher as compared to Nigeria. That's why we never seen that kind of impact. So we are actively working with the tower posts, the tower companies, to see if we can participate in contributing in terms of conversion of some of these sites into solar, higher capacity batteries, so that we can reduce this impact for any future impact to a substantial level. However, as you know that last year, the diesel price in Nigeria has moved from 320 Naira a litre to 800 plus Naira a litre as we exited in March. Obviously, it is unprecedented. Whether next year there will be further increase, further pressure on the diesel price, we don't know. But if we assuming that no significant increase in the diesel price, our margin, as you have seen, is quite resilient. And we continue to thrive, as Shivun has mentioned, in terms of incremental flow through over 50% in the margin for every dollar which we generate incrementally as a revenue.

Rohit, does that answer all your questions?

Thank you. Thank you. Sorry, just one last thing. If you can quantify what was the impact of demonetization on the voice revenue in Nigeria in guidance on that side?

Demonetization took a lot of cash out of the system in an economy that is predominantly cash. And the impact on our performance is 3% in Nigeria. And for the group, it's about 0.6 on the overall top line for the group.

Thank you.

Thank you.

But just to add on the demonetization, while demonetization has been withdrawn, and we have seen the trend coming back in Nigeria in the month of April. So it has come back to the pre-demonetization level in the month of April.

Thank you.

Thank you. Just another reminder for the participants on the phone lines, if you'd like to ask a question, please press star and then one. If you'd like to ask a question, please press star and then one. At this time, I will hand over for questions from the webcast and they will return for questions on the phone lines. Thank you.

Yes, a couple of questions from the webcast. First is, what do you think is the average rate of inflation across our market? And the second one is on Kenya. What is our strategy to continue to grow shares in the market and any possibilities of a public risk?

So inflation excluding Malawi and Nigeria, the inflation ranges between 8% and 10% across all other geographies, which is very normal. In Nigeria and Malawi, we have seen the inflation trend between 18% and 20%.

Back to the Kenya story. As part of our license obligation, there's a requirement to lease in Kenya. But the last couple of months, there's been discussion around whether that condition is going to be changed or is going to stay. We're still waiting for clarity from Kenya whether there's an obligation to lease. We are working on ways to comply with any lawful requirement of our license. So if we are obliged to lease, we will lease. But once again, There's been some indication from Kenya that this may not be a requirement, but whatever requirement is, we will meet that requirement. In terms of growth, of course, Safaricom is clearly dominant in Kenya, but I've been very pleased with the progress we've made. mobile services segment to continue to maintain share, to continue to acquire customers. Kenya, if you actually isolate the mobile money business and focus on only the mobile services, it's a very significant part of our portfolio. So I'm very pleased with the progress we're making in the growth of our mobile services business in Kenya.

Back to you, Senator.

Thank you. Are those all the questions on the webcast?

Yes.

Thank you. The next question on the phone lines comes from Faisal Afma from Goldman Sachs. Please proceed with your question, Faisal.

Yes. Thank you for the opportunity to ask questions. Most of my questions have been answered. Maybe it's just a question more about the portfolio of countries that you have at the moment. You know, you've been operating in this inflationary environment for a while. Do you see any room to effectively rationalize some of that exposure? And is that part of some medium-term strategy, or do you feel that you're comfortable with the current footprint that you currently have? And then my second question is more towards the, obviously, you've done a decent amount of work on deleveraging the balance sheet over the past few years. Do you feel you might actually now go back to a more progressive dividend policy in terms of linking it to the free cash flow level, or you're actually quite comfortable with how the policy currently stands out? Thank you.

On dividend, I mean, of course, it's directed by the board. We do have a progressive dividend policy. We're pleased by the single two. We've done 90% increase in this financial year to deliver 5.45 cents. That's our policy. And we continue to look at different issues, investment required in our So, we have countries in East Africa, we have countries in West Africa, we have countries in Central Africa, we have French-speaking and English-speaking. And we have, I mean, hard-coresses, we have soft-coresses. In most of the French-speaking countries, I mean, the UCF is linked to the Euro, which is more or less, I mean, We continue to grow very strong, double digit. EBITDA is 49%, one of the fastest growing telcos in Africa. EBITDA is best in class, in the top quarter in terms of performance. So I think it's a portfolio that delivers.

With reference to the debt profile and the leverage, etc., let me tell you that out of 1.4 times, if you exclude lease liability, which constitutes about 0.8 times out of 1.4 in this leverage, And this finance lease obligation is nothing but as we may, as we add 3,000, almost 3,000 sites on an average every year, this obviously tells us that this goes up, but then there are sites which are going out of finance lease obligation. So it is more or less 0.8 times static for quite some time now. In terms of our focus, Our focus is, as we mentioned in our main presentation, that focus is strengthening the balance sheet, reduce the whole co-level debt, which we have done by and large already achieved. And the next, the last piece of the bond, which is due in May 24, after that, there is no whole co-level debt which remains. And we push down the debt at the upper level in local currency. which comes with a slightly higher interest cost, but it also reduces the impact of devaluation and restatement of, or revaluation of the, of the Forex debt. So our clear focus in short to medium term is to now keep pushing down the debt at the output. And second is keep pushing, making local currency debts rather than dollar debt at output so that we can de-risk our balance sheet in terms of the devaluation risk. So that is our current position in terms of the overall debt management portfolio and leverage.

Thank you very much. Thank you. The next question comes from Madvendra Singh from HSBC. Please proceed with your question, Madvendra.

Yes, hi. Thanks for taking my questions. A couple of quick ones and then one maybe a bit detailed one. So if you could talk about, you know, the growth rate in mobile money, especially in the Francophone African markets, seems to be a bit slower than the overall annual run rate, especially during the Q4 period. So if you could talk about is there any real underlying slowdown there or is this just a seasonality issue? The second question is also on mobile money, but for Nigeria. So while we don't see any revenues being booked, has the commercial activities started already? So if you could share what kind of transactions are happening on the network, what dollar values, maybe you have made the transactions free right now. If you could talk about what's actually happening on the ground on mobile money. side in Nigeria that will be helpful and yeah so these two questions and then on the margin side you had a very resilient margin obviously for the year but also for the quarter so wondering you know if you are seeing any risks going forward and maybe you know how confident you are of maintaining these margins as well as the Especially if you also look at the mobile money business, how confident you would be of maintaining these margins. Thank you.

Let me start with the margin story first. And I've explained margin philosophy earlier on. The fact that for every increase, $1 increase in top line, our objective is to make sure and it goes towards the bottom line. And we've done that just for the past 21 quarters. We have a number of ways we use to deliver this. One is a very, very firm cost control process. We also continuously review operating process to take processes out. We have a very efficient KPEX deployment machinery that would deploy KPEX that would lead to reduction in operating space. We've mentioned the fact that we're working with Tower Coast to migrate some of our energy sources from diesel to battery to solar. We also continue to increase the grid component of our energy sources. So a number of things we do to mitigate the impact of inflation and cost. In the last year, the major impact has come from diesel energy, which is why we continue to work with Tower Coast partners to find other ways of powering our sites. And that speaks to battery, that speaks to solar, that speaks to grid. We're working on this. So, and on top of this, we just have a very neat structure that continuously takes costs out of the system to continually be operating with it to make sure things that shouldn't be done are not done very cheaply. We're just very, very firm on the constant review of our processes to take costs out of the system. Now, let me take you back to the mobile money in Nigeria. We got the license last year. We started business in June of last year. Our initial focus, once again, was to have a food-proof IT platform. That is essential to be trust, to be transparency. We spent time in building this IT infrastructure, IT platform that will be fraud-proof, that will give confidence to our customers. I think we're very sweet. is a fraud proof. It would deliver drive services to the customers. It would also let us configure as many products as possible. We invested time behind this. We invested money behind this. We've done that. The second thing we've done in the first couple of months is the distribution infrastructure. acquiring agents, setting up mobile branches, setting up kiosks, setting up mini shops. We've done that very well. And the testimonials we've done, that is what we saw in Q4, which is actually our first real month of outcomes. We were able to open 12 million wallets for the full year. As of end of March, we had 600,000 active customers. I've mentioned we have 52,000 active agents. And in terms of revenue, if I'm to analyze the throughput in Q4 of our P&G business in Nigeria, it's close to $500 million. The take rate is very low in Nigeria, but my focus for now is not even on take rate. It's on just building a structure that will give sustainable revenue in the future. And I'm willing to spend the next couple of quarters increasing this infrastructure, both the right level of customer base, that would make it profitable in a low-margin economy, because the margins are quite low in Nigeria. Unlike what we have in other parts of Africa, where tech rates are between 0.6% and 0.7%, the tech rate in Nigeria is 0.26%. So the key to success is having a very large customer base, and that is what we continue to work upon in the first time in a few months. Now back to French-speaking Africa. We are looking at a growth rate for mobile money And in our French-speaking countries, we've grown the mobile money revenue by 20%. I won't say that it's a bad growth. 20% is not... That's what we've done in the French-speaking countries. In East Africa, where we have most of our sources, cases, sources, countries, we've grown revenue by almost 33%. So that's... The way the growth is bifurcated between the two major regions where we have substantial mobile money business. For this Africa, it's where we have most business in mobile money anyway, and we've done 32%. French-speaking Africa is about 20% growth the full year.

But Q4 growth was only 16%. That's what I was talking about.

Yes. So let me try to also add what Shakuna said. We have to keep in mind that Franco's countries, we have seven countries in Franco, out of which only two countries, which I would say Gabon and DRC are actually the mobile money, the business which exists and both are growing at a very substantial rate, I would say, more than 20% in both the places. Rest of the places, you have to keep in mind that we just started, because we got the license in Chad, Niger, Congo Bay very recently. And we are just ramping up those countries. So we have to probably wait a few quarters to see that growth, what you see in the East African countries. Because East African, most of the markets, I would say 400, out of six countries are quite mature and a very well established Airtel money business. So this Franco country, as and when the business will start picking up, the mobile money business will start picking up in the other country, Franco will also go back to a decent growth rate as you see for East Africa. So East Africa is blessed because we have four countries out of six countries which are pretty mature mobile money market. In Franco, it's only in case of two countries.

Okay, thank you.

Thank you. The next question comes from Kayode Isayung from Cardinal Stone Partners. Please proceed with your question, Kayode.

Hello, good afternoon. Thank you for this opportunity and congrats to you on what is an amazing performance, at least on the top line. So, My first question is as regards the discrepancy in number-facing performances across your regions. I noticed, and I think you mentioned on this call, in East Africa and Francophone Africa, expanded while Nigeria reported some 4.8 points and pulled back. And the explanation of my understanding is that most of this was due to Diesel costs rising, diesel prices rising across the Nigerian business, almost tripling. But my question is, I know for a fact that the energy price issue was mostly broad-based. Several countries, not several countries, almost everywhere around the world were witnessing energy pressures. So my question is, what exactly were the levels you were able to put in other regions? Were you able to raise prices? And what happened? your performance there significantly badly on an EBITDA level compared to Nigeria. And secondly, your strategy of redirecting debt from Mholdco to Opco. I would like to understand because I know for a fact that the cost of debt in your operating countries, Nigeria, Kenya, and several of these countries are significantly higher than your KD, KD cost of debt at holdco levels. So my question was exactly at the benefits you're hoping to accrue by transferring debt from cheaper holdco to operating countries where you have double digits interest rates. And then also do you have like a target debt to EBITDA ratio that you're looking at, so maybe at what point do you think you start to deleverage? At what point do you start getting worried about leverage? And thirdly, the other question I have is, well, as you've seen, data continues to be the main driver of goods for cell goods, or MNUs, particularly in SSOs. So my question is, how long do you think there's leg room for data good, or how long do you think this runway is for, before you start in, so maybe slow down in growth for data, for data usage, and do you, I'm how convinced are you about the usage, use case for 5G, especially considering the fact that SSA continues to have the largest number of people below the poverty line? Those are my questions.

I hope I was audible. Let me start with the first one, about term of wealth. There are structural differences between the various regions and countries. Nigeria has a very low level of grid availability. So we've got a very dependence on diesel for power in our sites. Unlike in East Africa and French-speaking African countries for us, we have a relatively decent level of readability. So that means we don't have over-reliance on diesel. So that's a major difference. That is why you're not going to see a massive impact on performance in French-speaking countries, East African countries, compared with Nigeria, where we rely mainly on diesel to power the sites. That is one point of difference. The second point of difference, specifically by East Africa specifically, is on the fact that last financial year, we actually sold In East Africa, we saw towers in Malawi. We saw towers in Tanzania. That also affected, I mean, our revenue, that slowed our revenue. So by the time you observe one against the other, you begin to see why we had a very, very cheaply better EBITDA margin this year in East Africa, the first week in Africa, compared to the slowdown in Nigeria. Talking about the debt profile, I'm sure Jardine will give me more information on the debt profile. Why are we pushing debt today? Of course, there are tax advantages. There is currency match as well. But Jardine will give you more information on this. And the last piece of data growth, in terms of data revenue, let me give you a few data points. In terms of data consumption, Across our portfolio, it's about 34.45 gig per person. In countries, let me take India as an example. It's close to 16 gig per person. That is very long-run. We are available between what our customers are consuming and what a typical consumer consumes in our country. So that's a very, very long-run way. That gives us a lot of optimism that with continuous investment in 4G, with 4G devices becoming cheaper, then we can go very high level of growth in the future. Secondly, if you look at the population profile in our territories, we've got the fastest growing population in the world. Most of the people are very young, below 20, 21. Median age is about 19 in Africa. That shows that, I mean, young people are very many. What do young people do? They consume data. Where do they consume data? Mobile devices. They are mobile first, mobile only. If you consume data on iPhone, Samsung, Nokia, any phone, you're using the private creator. And with this huge number of young adults, each number of children we have, some of them have been through the digital divide for the first time. because we expand our network to where they live, or because they're able to afford the device to consume, I mean, 4G to consume data, that shows a very long-term ability for us to continue to grow data-level news. So we're still, I mean, in the early stages of the growth. I'm firmly optimistic that, I mean, we're still going to continue, I mean, to grow data volume, I mean, in Africa. Now, talking about 5G use cases. I've identified home broadband as a major use case for us, given the very, very low penetration of fiber broadband in Africa. I think 5G can be a good vehicle for deploying broadband to small businesses and to homes in Africa. That we're going to do. We're also beginning to see a pocket of 5G assets. The Unreachable is in some parts of our case. It is all of those folks in the 5G as well. And there are some enterprise use cases that I imagine as well. to see this opportunity. In one of our countries, we're actually deploying a private network for one of the mining operators in one of our countries. So, such niche cases are also coming to view, and we are positioned to capture these opportunities in the medium term. Jared, do you want to talk about that?

Yes. So, a few things we have to keep in mind, which we stated earlier, and today also we discussed it. One of the, as we stated that one of our objective is to push down the debt in local currency at the opcode, but primarily for two reasons. If you see historically, the devaluation impact, the CAGR three-year devaluation, if you see across various geography, you will see an average devaluation of 8 to 10% CAGR almost every year. That's an average. I'm talking about the average devaluation. There can be a little bit plus minus here and there, but that's mainly in East Africa and Nigeria. Now, also, we have to keep in mind that if we source dollar at holdco at 6-7% and push down that debt to opco, there is no tax shield on the interest which we pay for servicing that debt. Whereas in the local currency or if the debt is pushed down to the APCO level, you get a straight 30% tax shield or the applicable tax shield, but average, let's say, 30% tax shield all that day on the interest which we pay, number one. Number two, we also avoid this 8% to 10% average devaluation which we have seen. So there is no requirement of any restatement of the local currency loan. And we have to also keep in mind that this is a natural thing that most of our income is in local currency. Therefore, the endeavour should be the expenditure as well as the debt should be in local currency so that there is no mismatch between the income which is in local currency and the debt profile which should be ideally in local currency. Now, this is our endeavour. Whether we will be able to do it in a short term? The answer is will require some time because the markets in each country are different, the financial market, but we are clearly focused on doing this activity over the next couple of years so that we minimize the impact of devaluation as well as start getting the tax shield on the interest part of it.

Thank you. At this time, I'd like to hand over for questions from the webcast. Thank you.

So that's a couple of questions. First is, are there more tower assets sales to expect?

Okay, we've got only two countries left, and the countries are, they've got very strict rules on private tower costs, and we continue to work with regulators and independent parties to get the rules liberalized to make it possible for towers We're going to need two countries left to go. And the rules are just slightly different from the rules in other countries on sale of towers.

Now to close, unsurprisingly, on Nigeria. Could you give some cover on the Nigeria rates that you used to obtain cash from Nigeria? Second one is, is this cash crisis in Nigeria can be used for the global money, the buy-in rate? and trade in February, if there is any plan to raise that instrument in Nigeria.

In terms of the demonetization, like I said earlier, the impact is fully over. It ended in March, so we're back to growth. And out of February, trade policy, something good comes out of it. So I expect this to really encourage customers to open wallets, and I'm sure they're going to open smart cash wallets as well as awards. thing that will come out of this, we're pushing a lot more people to digital channel and keep cash under their bed or keep cash in their wallet. So, I think that will be a boost for our business. In terms of debt instruments, there is an opportunity for me to issue debt instrument commercial papers. The rates are quite cheaper than taking bank loans, and I'm sure that beyond that, if I'm So that is a possibility. And the last question. Did I miss anything? In terms of rates, I mean, we assess foreign exchange from banking sources in the country. We don't use parallel market sources for assessing foreign exchange in any of our markets. And the rates are determined by the banks. They are bank-to-bank, bank-to-customer rates. And we just... comply with the rates given by the banks and we use official sources to assess for investors the facts.

Thank you. Thank you, operator. I think we can now close.

Thank you, gentlemen and ladies. Have a good day.

Thank you. Thank you very much.

Thank you very much. Ladies and gentlemen, that does conclude today's conference. Thank you very much for joining us. You may now disconnect your lines.