Airtel Africa Plc

Good day, ladies and gentlemen, and welcome to the AFL-Africa First Quarter 2024 Results Conference. All participants are currently in listen-only mode, and there will be an opportunity for you to ask questions later during the call. If you need assistance during the conference, please signal an operator by pressing star and then zero. Also note, this event is recorded. I will now hand the conference over to Mr. Shaganugan Sanya. Please go ahead, sir.

Thank you for joining us on today's call. And I'm joined on the line by CFO Jadav and our Deputy CFO and Head of Investor Relations, Pierre. We'll shortly be answering your questions, but first, I would like to provide you with a brief overview of our performance in the first quarter. We have reported a strong set of operating results, despite the macroeconomic backdrop, which remains very volatile. Revenues in the quarter reached almost $1.4 billion, with constant currency growth of 20.4%, and improvement from the 18.6% growth reported in the final quarter of last year. This improvement reflects the success of our strategy across all of our regions. The strong performance in revenues, combined with a continued focus on efficiencies, enabled us to report an improvement in EBITDA margins across the group by almost 70 basis points to 49.5%. This is an increase of 11.1% in EBITDA, a reported currency, and represents 22.5% in constant currency. Really strong operating performance. Before I go through the detailed regional performance of the group, I wanted to comment on the recent events in Nigeria following the devaluation of the Naira towards the end of the last quarter. We welcomed the initiatives introduced by the new Nigerian president, which has resulted in the reintroduction of the willing buyer, willing seller model for the Nigerian Naira. We believe this will lead to a more stable Nigerian foreign exchange market in the long run. As a result of these initiatives, In Naira, Nigerian currency devalued significantly in June. This has impacted our results for this quarter. Reported revenue and EBITDA were only marginally impacted because of the devaluation occurring towards the end of the quarter. However, we reported a false $71 million non-operating exception item in finance costs, reflecting the disturbance of U.S. dollar liabilities in our balance sheet. The after-tax impact of this amounts to 317 million U.S. dollars. This adjustment has materially impacted our earnings for the quarter, but with all of our liabilities now restricted to reflect the devaluation, there should be no further foreign exchange losses, assuming no further devaluation. The recent events will, as you expect, improve liquidity over time, and we facilitate our ability to sustain the recent growth momentum we've seen in our market. Nigeria is a very significant market for us. It offers some top growth potential, and we will continue to actively invest in the market to capture this opportunity. Our strategy remains unchanged, and we look forward to reporting on our successes in the coming quarters. Before I discuss our performance across our two operating segments, Electro allied our performance on a regional basis, our three regions, including both mobile services and mobile money. In Nigeria, we continue to see very strong trends with constant currency growth of over 23% in the period. This has rebounded very strongly from the demonetization impact in Q4 of last year. In East Africa, we reported almost 23% revenue growth in constant currency as well. with our Francophone region coming in at 13.5%, all the three regions seeing an acceleration in growth from the previous period. Let me now talk about our mobile services segments. The strong demand for services across our food chain, combined with our very attractive consumer focus propositions, resulted in an almost 9% growth in the customer base, which combined with an upgrade of 9.8%, almost 10%, resulting in constant currency revenue growth of over 19% and 8% in reported currency. In Nigeria, constant currency mobile services revenue grew by 23% over the period, with East Africa region growing almost 20% and Francophone about 13%. Unlike many other regions in the world, our voice revenues grew almost 12% in constant currency, Given the low levels of SIM penetration and continued pent-up demand for voice services across the market, we expect this to continue. The growth in voice revenue is further supported by almost 30% growth in data revenues, reflecting our increasing and improving network coverage and capacity to facilitate the significant demand we see for data services. This improved coverage has contributed to a 22% growth in data customer base over the year, almost 50% of which are currently using 4G services. Given that usage level remains very low compared to global levels, we expect this growth to continue. Now, mobile money business. Our mobile money business continues to see a very strong performance with about 31% constant currency revenue growth in the period and acceleration from the previous period. And it remains the fastest growing mobile money business in Africa. This very encouraging growth was driven by continued customer growth of over 24% and further enhancements of the mobile money ecosystem. This led to a 47.2% growth in transaction value over the year to almost $107 billion in online transaction value. In Nigeria, we continue to build the PSD business, and we have added over 900,000 active customers over the last quarter, reaching 1.5 million customers. The strong top-line performance across all regions continue to support our group EBITDA, with EBITDA margins rising to 49.5% despite the influential pressures in the market, as I mentioned in my opening paragraphs. We continue to focus on efficiencies in our business with our win-with-cost strategy, and we remain encouraged by the progress we've made. We do not expect a material impact on our EBITDA margins as a result of the Nigerian NILA devaluation. Our margin remains very resilient. Over the year, foreign exchange changes have had an adverse impact on our reported financials. While the NILA devaluation in June was very exceptional in nature, Other markets have seen a devaluation, in particular, the Malewian and Zambian kwacha, as well as the Kenya shillings. After adjusting for deficit losses across our markets, EPS was up 16.2%, although this did benefit from a one-off gain in default tax as an indirect consequence of the Naira devaluation. Briefly, in terms of the balance sheet and cash flow, At the end of June, our livery ratio was 1.3 times EBITDA, with net debt of $3.3 billion. The livery ratio has improved slightly from K-4 levels, but adjusting this ratio for a full-year impact of narrative valuation, we expect the ratio to be between 1.4x and 1.5x. 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. We therefore reiterate our previous keepers' guidance of between $800 and $825 million for this financial year. Furthermore, we continue to actively reduce our balance sheet FSS exposure and continue to upstate cash from our various subcourses. Before I open to Q&A, I thought I would summarize the key conclusions from this quarter's results. Operationally, I am very pleased with the performance achieved over the last few months. The accelerating growth reflects the opportunity available across our markets. And our clear and consistent strategic approach ensures we capture this opportunity. With the background of continuing economic consultancy across many of our markets, the performance is very encouraging. Although the narrow valuation had a material impact on our reported results, we believe The initiatives adopted are for the best of the country and are approaching the market. The scale of the opportunity and the willingness to invest significant capital into the market does not change. Finally, I am encouraged by the work undertaken over the last few years to minimize the impact the devaluation has had on our business. Our capital allocation framework remains very robust and we look forward to continuing executing on this and of our priorities. And with that, I would now like to open the line for questions for which I'm going to be joined by Didip and Pierre. Operator, I now hand over to you.

Thank you very much, sir. Ladies and gentlemen, at this time, if you do wish to ask a question, please press star and then 1 on your touch-tone 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 list. Again, if you wish to ask a question, please press star and then one. Our first question is from Rohit Modi of Citi. Please go ahead.