Airtel Africa Plc

Good day, ladies and gentlemen, and welcome to the Eto Africa half-year results. All participants will be 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 star and then zero. Please note that this call is being recorded. I would now like to turn the conference over to Shagan Oguntanya. Please go ahead.

Thank you. Hello, everyone, and thank you all for joining us today. With me, I have Jadif, our CFO, and Pierre, who is head of Investor Evisions. Let me give you some highlights over the last six months and provide a brief update on the strategy before I move on to Jadif, who's going to run for the financial resource. Our economic and operating environment has been very challenging in many of our markets. However, we have been much stronger, having seen considerable progress on our priorities, which has contributed to a successful operating performance across each of our three regions. Very strong constant currency revenue growth performance has helped offset the inflationary pressure on our cost fees, resulting in an improved EBITDA margin, enabling us to further improve our capital structure. Our purpose is to transform lives across Africa. The strength of the business supports employment, as well as increased contribution to the economy and community, also allowing us to support increasing infrastructure requirements of the many countries where we operate. We continue to bring communities closer and give them the opportunity to access affordable financial services, sometimes for the very first time. Value creation for our stakeholders has been evidenced by these strategic successes. We have navigated the challenging operating environment to report a strong operational performance with sustained customer growth across all our segments, voice, data, and mobile money. These have been further supported by increased usage across our network This sustained demand for services has resulted in an almost 20% increase in constant currency revenues in the first half of this financial year. Despite the inflationary empowerment, the strong revenue performance has contributed to an increase in EBITDA margin of 63 basis points. a key priority, and we are all now well on track to fully repay the old code days, which is due in May of 2024. And the Board has declared an interim dividend of 2.38 cents per share. This is up 9%, reflecting our confidence in the long-term sustainability of our business model. To sustain this performance, we have maintained network investment momentum to provide the platform to feed our group our growth ambitions and momentum on our social media strategy building subject and continues to be embedded in everything we do. The next slide. It's worth putting our performance for the context of the environment we operate in. And I would like to highlight a few of the key issues and now we are working to mitigate against those challenges. One, remains impacted by high inflation. However, with affordable and transparent offerings, we continue to provide value for our customers. Secondly, inflationary pressures remain a challenge for the business, but we heard this from constant currency growth, operation leverage, which combined with cost optimization enabled an increase in EBITDA margins for us. And thirdly, currency volatility across the region is now a new challenge for us. But with a focus on reducing dollar exposure across our cost space, we've been able to report a margin improvement over the period. Finally, despite our first liquidity challenges across some of our markets, we remain successful in obscuring cash from our costs, putting us in a position whereby we are on track to fully repay the old code debt when due in May of 2024. Definitely an update on our strategy priorities and our achievements that highlight how this strategy is working for us. This slide, next slide, captures the key drivers of our future growth potential. The demographics of our market combined with the low level of sin penetration, we continue to support the growth in our customer base. which combined with increased usage will drive very strong revenue trends. And very important, the mobile money journey reviews are at a very early stage across all of our markets, and this will further underpin the growth momentum. As a group, we're very clear on how we're going to capture this growth. Our win-win strategy has delivered, and we don't anticipate this changing in any way. Additionally, we have executed very successfully and the last 23 consecutive quarters of WG revenue and EBITDA growth has shown how we, as an organization, we have the right framework and mindset to continue delivering. Now see the growth algorithm on this chart. It shows how our operational success has been achieved and also explains how we intend to sustain strong momentum going forward. The growth in the customer base across all segments, combined with increased ARPU, as increased usage is monetized, translates into very strong revenue growth. and cross-organization drive increased resources for investment to reinforce future growth, therefore enabling continued customer base growth. This cycle will continue to sustain our strong operating momentum in the future. Slide 9 shows our strategy, which remains unchanged. The six pillars which are designed to capture the great opportunity as a way to transform lives across Africa. Our strategy is clearly working. we will continue to seek ways to enhance our service offerings to enable sustained growth and gain value for all stakeholders. This slide shows the impact of the valuation and the fact that it doesn't affect long-term valuation trends. You can see in the period, our important currency results have been significantly impacted by the changes to the FAS markets in Nigeria, In second quarter, we've been completed in full impact of the June devaluation, and I reported currency group revenue declined by 4.7%, with EBITDA down 3.3%, as shown in the charts on the left side of this slide. Why this scale of devaluation is very exceptional? Facing the effects of interest across the market is not new. Our strategy focuses on the ability to drive sustenance and strong constant currency revenue growth. to limit the impact that FFRIENDS' evaluation has on our business. The success of this strategy is reflected in the performance of the company over the last five years. By growing constant currency revenues, on average by 17% each year, we've been able to report a 10% year-to-year growth over the same period, which has in part enabled a 13% growth in reported currency EBITDA. As a result, we continue to focus on long-term strategy of very strong and sustained constant policy revenue growth, which I will explain in the next few slides. You can see the demand for telecom services is the key driver of sustained growth. We're supposed to market with some of the strongest population growth rates in the world, as well as some of the most youthful populations. When you combine these, with very low levels of self-penetration across our markets, it provides significant scope for sustainable growth. One of our key priorities is win with data, and the opportunity for increased data adoption across our markets remain very, very significant. Currently, only 21% of customers use 4G services, and only 40% of our customers are actually using data services. Through continued network investment, our target remains to enable increased 4G adoption across our footprint. While we continue to see the opportunity for continued customer-based growth, we also see significant scope for higher usage growth across both voice and data. Over the last number of years, we have seen this strong growth in both voice and data usage by customers. This has been driven by a few factors. One, our increased network investment to increase capacity and coverage across our markets. Two, customize an affordable freeze to drive increased user adoption. Number three, our continued investment in our distribution infrastructure to increase customer touchpoints. And finally, the very low average usage of good data and device services compared to global peers. All of these factors remain very relevant and we continue to support IAR consumption across our network. Now the mobile money opportunity. In addition to the telecoms growth opportunity, we're in a very unique position to layer on additional growth in the form of mobile money to further enhance shareholder value. Mobile money services is all about driving increased financial inclusion across 14 markets. low levels of financial nutrition has been one key reason for the 23% average annual growth in the customer base over the last five years. It's also been reinforced by the trust that has been built through the provision of easy-to-use services with a very strong focus on availability of flows so customers can access their cash with ease as and when they need it. The chart on this slide shows how mobile money is solving the problem of low financial inflation across our many markets. We believe there are four differentiating factors enabling increased customer adoption of mobile money services. The first one is branding, the second is distribution, and the third is the strategy of KYC activities, which in a telecom business ensures we can simplify the onboarding process for new customers. And finally, targeting microtransactions in an affordable manner to further support increased transaction value. These factors are but nothing in our strong historical performance, and we continue to enable a certain level of growth going forward. The next slide summarizes the outcome of the success of the previous two slides on mobile money that I've shared with you. At 73% growth in the customer base in the last year, combined with 45% growth in the transaction value, reflect the success of the offering, transitioning to 31% revenue growth. With this level of growth and a very high margin, the opportunity to have additional value over and above what other single players in industry can deliver remains very significant. With this, let me hand over to Jadid to discuss the financial results in more detail. Jadid, please.

Thank you, Shagun, and good morning and good afternoon to all of you. Let me start with the key financial highlights. Our underlying results continue to be good despite macroeconomic headwinds and exchange rate volatility. We expanded our customer base by 9.7% year-on-year to reach 148 million customers. This helped us to sustain our revenue and evitar growth momentum. Revenue growth for half year was 19.7% in constant currency with double digit growth in all three key service segment namely voice, data and mobile money. EBITDA grew by 21.2% in constant currency faster than revenue growth to reach $1.3 billion in reported currency absolute EBITDA. EBITDA margin at 49.6% expanded 70 basis point despite high inflation and adverse macroeconomic conditions. Operating free cash flow at 1 billion was up 5% on reported currency. CapEx for the half year at $312 billion, which was almost similar to the prior period. Leverage at 1.3 times was stable. The board has declared an interim dividend of 2.38 cents per share, up 9% as compared to last year, in line with our current dividend policy. Slide 18, the overall revenue growth was 19.7% in constant currency, while in reported currency growth was 2.3%. While the impact of Nigerian Naira devaluation is not fully embedded in half-year revenue since the devaluation occurred in mid-June 2023, due to fully incorporate the devaluation impact. Therefore, if we apply September 2023 closing rate for Naira throughout the first half of the financial year 24, the revenue would have declined by 5.1%. For the period ended 30th September 2023, the negative impact on revenue for three and half months has been 283 million dollars since the Naira devaluation took place in mid-June 2023. The annualized impact of Naira devaluation on revenue at the current exchange rate is approximately 900 to 950 million dollars. In constant currency, all key service segments grew double digit, with voice revenue up by 12%, data revenue up 20%, and mobile money revenue up 31%. Next slide. We show the group EBITDA growing by 3.7% in reported currency to $1.3 billion. EBITDA has been adversely impacted by $165 million as a result of currency devaluation, primarily in Nigeria. For the period ended 30th September 2023, the negative impact on EBITDA for 3.5 months has been $153 million since the Naira devaluation took place in May-June 2023. The annualized impact of Naira devaluation on EBITDA at the current exchange rate is approximately $450 to $500 million. OpEx increase of $192 million is primarily contributed by the volume-driven increase of $120 million related to additional sites and other revenue-linked expenses and balance $70 million on account of the rate increase, especially in the diesel price in Nigeria. Despite the above headwinds, EBITDA margin of H1 was 49.6% and improvement of 70 basis point. Moving on to segment performance in Nigeria, Revenue grew 22% in constant currency, supported by both customer-based growth of 5% and ARPU growth of 15.4%. Voice revenue grew by over 16%, primarily driven by voice ARPU growth of 10%. Data revenue grew by over 29%, contributed by 17% customer-based growth and 12% growth in data ARPU. Data R2 growth was supported by 4G customer base growth of 33% and 4G usage per customer per month grew by 43%. EBITDA margin at 53.5% increased 275 basis points, benefiting from continued operational efficiencies and partially by lower diesel price during quarter 2. More recently, diesel prices have started to increase again, And if this continues, we can expect some developments in quarter 3. In East Africa, revenue in constant currency grew by 23.6%, driven by double-digit growth in all three services, voice, data, and mobile money. The revenue growth was supported by customer base growth of 11%, R2 growth of 11.7% to reach $2.7. Voice revenue grew by 14.6%, driven by customer as well as R2 growth. Data revenue grew 31%, driven by 28% growth in customer and over 3.4% growth in data R2. We further expanded the 4G network across the region. Over 50% of total data customers are 4G, up from 43% of last year, of the similar half of previous year. Mobile money revenue grew by almost 35%, driven by over 16% growth in customer base and 14% in R2 growth. EBITDA margin was almost 54% expanded on an importing basis point in constant currency as a result of revenue growth, cost efficiencies, and marginally benefiting from the interconnect cost reduction in Kenya and Rwanda. Coming to Francophone Africa, revenue grew by 11.5% in constant currency. By reported currency, revenue growth was 14% higher on account of almost 5% appreciation in SIFA. Central African Frank. Customer base of around 31 million, up 15% year-on-year, while ARPU was flat in Boston currency at $3.7. Voice revenue growth was 3.3%, driven by customer base growth, partially offset by drop in voice ARPU, which was impacted by inflationary pressure and political development in few key markets. Data revenue grew by almost 23%, largely driven by 26% growth in customer base. and around 5% growth in data output. Mobile money revenue grew around 19%, driven by 22% growth in customer base. EBITDA margin at 47.2% declined 131 basis point. Adjusting $19 million one-time OPEX benefit that we had in prior period and reported in last year, normalized half-year EBITDA margin improved by 185 basis point in constant currency. Next slide. It shows the key components that led to increase in finance cost. As you can see, the finance cost, excluding exceptional item, was higher by $44 million, largely as a result of increased local currency debt in operating entity in line with our push-down debt strategy, as well as increase in baseline interest rate in some of the markets. Exceptional item loss of $471 million was related to the devaluation in Nigeria and reflecting the impact of revaluation of USD liabilities and derivatives in Nigeria operation. Coming to EPS, despite our good underlying performance with double-digit growth in revenue and operating profit, EPS has been negatively impacted due to exceptional forex and derivative loss in Nigeria. EPS before exceptional item at 7 cents was up by 3.2% over the prior period. Next slide. Our capital allocation policy remains same. Our key priority remains to continuously invest in business along with further strengthening of the balance sheet. Our capex guidance remains the same, which is between $800 to $825 million for the full year. Returning cash to shareholder through our progressive dividend policy remains one of our key priorities. The board has declared an interest dividend of 2.38 cents per share, reflecting a growth of 9%. Next slide. We continue to invest in future growth. We have invested $312 million in tangible CapEx during the first half of the year. Eighty-nine percent of our CapEx investment is geared towards growth initiative, mainly to increase data capacity, coverage expansion, and strengthening the IT infrastructure. We have also rolled out around 5,000 kilometer of fiber network in last one year, resulting in 70, almost 74,000 kilometer of total fiber in our network. Next slide. Normalized free cash flow. Cash from operation post interest and tax payment was higher by $16 million due to lower cash tax. Additionally, cash cap expense were in line with the prior period, while lease liability payments were higher by $23 million. Hence, our normalized free cash flow before spectrum investment was largely stable despite forex headwind. During the first half, we paid $127 million of license renewal fee for 2100 MHz spectrum in Nigeria. which was higher by $48 million as compared to the spectrum acquired in DRC and Kenya in H1 of last year. We continue to focus on strengthening our balance sheet by firstly reducing our foreign currency debt across Ofcos and Burco. Burco debt is due for repayment in May 2024 and we are well positioned to repay the same. Secondly, OPCO local currency market debt increased by $450 million as we continue to execute on debt pushdown strategy. Further, our upstreaming potential is very diversified across our region, not making us overly reliant on a particular region. Group leverage at 1.3 times has remained stable compared to last year. However, the EBITDA used to compute the leverage does not fully incorporate the devaluation of Nigerian Naira, If we include full 12-month impact of the Nigerian Naira devaluation as on date, the leverage ratio is expected to be between 1.3 and 1.4 times. The total weighted average interest rate was 8.8%, vis-a-vis 6.64% in the prior period due to increase in the base interest rate and higher interest rate on local currency of Kodak. I'll now hand over back to Shagun to conclude the presentation. Thank you. Thank you, Jared.

Finally, on this slide, slide number 30, very few words for me on summary and outlook. As we've seen from our results, our focus has contributed to very strong operational and financial performance, and we continue to demonstrate positive developments on nearly every key metric. Our near-term focus will remain on investing in our network, and our product is finding that distribution to be closer to our customers and at the same time building new services for future growth. Clearly, our results have been imparted by the narrative evaluation in Nigeria, but we continue to believe that this is for the good of the economy and not impart our ambitions in the country. The good opportunity across our markets has remained very intact and we see ourselves well positioned to deliver against this growth. Although there are some cost elements, particularly in Nigeria, with continued operational leverage and cost efficiencies, we aim to deliver and improve the data margin in 2024 versus 2023 financial year. And with that, I would like to thank you all for your attention today. I would now like to open the floor for questions.

Thank you. Ladies and gentlemen, if you would like to ask a question, you're welcome to press star and then 1 on your touch-tone phone or on the keypad on your screen. You will receive a confirmation tone that you have joined the queue. If you wish to withdraw your question... You may press star and then two. For those on the webcast, you may submit a question using the text box at the bottom of your screen. The first question we have is from Maurice Patrick of Barclays. Please go ahead.

Oh, thank you. Hopefully you can hear me okay. A couple of questions from all the explanations so far. On the EBITDA margin side, I think you spoke about looking for the full year, you've already shown pretty strong margin growth in the first half. Given the comments you made around Nigerian energy maybe becoming more of a headwind in the second half, I wondered if you thought you could maintain the level of margin growth into the second half that you see in the first half or should it be more flattish? And the second question really relates to mobile money in Nigeria. because I'm not wrong from the presentation report. I think revenues are $1 billion, I think, in this last quarter. I'm just curious to understand how you balance the priorities between growing the ecosystem and then when we should start seeing a financial impact coming through. Thank you.

Thank you, Maurice. You've seen what we've done over the last 23-odd quarters. We continue to deliver very strong double-digit growth and our cost efficiencies continue to expand our EBITDA. Although we don't give any guidance for the future, we are very confident that our operating model will continue to deliver very strong double-digit growth and at the same time lead to very strong EBITDA. Specifically of Nigeria, we put a number of things in place to control costs. Key among those measures we put in place are energy efficiency through use of some electronic equipment, which consume less energy. In terms of taking care of our towers, we're putting lithium batteries and solar panels, working with our tower co-partners. We're also looking at more grid connectivity to reduce the dependence on the power, on the diesel. We did some transmission routing, and we're shifting a number of the charges from physical agents to digital chargers. All these are helping us to contain the concept which we see in Nigeria. So, we see what we've done. We're very confident that our model will continue to deliver a very strong double-digit growth in terms of top-line, and at the same time, very decent EBITDA levels. Talking specifically about the PSG opportunity in Nigeria, we're very clear in terms of priorities. We want to have a decent customer base before we start thinking of monetization. That will continue to do, to expand the customer base, expand the network. And we also keep on building the very wide ecosystem required for monetization. I think it will take a couple of more quarters for us to get a decent customer number that will provide me with a very good level of monetization.

A couple more quarters before you start to monetize. Sorry? We've got a couple more quarters. We've got a couple more quarters.

I can't give any specific indication as to which quarter we're going to start monetizing. In terms of broad-ended philosophy, our broad strategy was to continue to expand our customer base and also expand the agent network. The numbers are very encouraging in this quarter, and we continue to push all our efforts towards increasing the customer base and expanding the agent network as we create a much wider ecosystem in the short term. Thank you.

The next question we have is from John Carides of Numis. Please go ahead.

Thank you very much. A couple of these are just housekeeping. On the housekeeping front, can I confirm that although upstreaming of cash from Nigeria is still difficult, it's not more difficult than it was before of the reintroduction of the willing buyer, willing seller model. It's really difficult to figure out, essentially, if there has been any overall progress since the middle of June there. And then secondly, in terms of the housekeeping point, I know that you don't report it as a matter of course, But would you give consolidated CAPEX by geography, at least on request, please? And then thirdly, I wonder if there's anything you consider a trial of building the two data centers in Nigeria and Kenya is going. if there's any sort of reason that you are incrementally more confident about the prospect since we last spoke. And then very lastly, I see MTN Nigeria took business away from IHS. And just working back from the rates, the revenue that was lost, the tenancy ratio looked ginormous. Do you have prospects in any of your markets and any appetite to move tenancies from one tarco to another, please?

Thank you. Those are very good questions. I'm going to start with the first one on streaming of cash. You know, we operate in 40 different countries. And we've been able to upstream cash from many of the countries in our portfolio. We don't depend on only one country. In the half year, we've upstreamed over $300 million from the many countries in our portfolio. So that is one clear headline for me to emphasize. And secondly, in the next couple of months and last couple of months, our focus in the year has been on sourcing dollar, not on upstreaming dollar, because we do have a number of bear dollar abilities to satisfy. So that's been the focus in the last couple of months. Yes, it's slightly more difficult since we went to the willing buyer, willing seller formula for as a foreign exchange, but the impact on our business has been very minimal, given the fact that we've got 13 other countries where we're able to upstream various amounts of money to HQ. As I speak now, they've got enough money to pay off the debt at HQ, the $550 million which is going to mature May next year, and that gives the strength of our portfolio, the fact that we're able to use various countries in our portfolio Question on KPEX, I will let Johnny take the question on KPEX. The guidance is always between 800 and 825, but once I complete your last three questions, I'll give the mic to Johnny to speak about the KPEX. The IHS and HEC equation, I mean, we, I say that the balance of power is shifting from the tower coast to up, third coast now. We do have a ministering main tobacco to work with, RH, CTC, and Ilios in various countries and portfolios. And the dinners are due at various times. We continue to evaluate each of the contracts and we do what is best for our business at any material time in the future. I think what MTN has done is probably an indication to the fact that, I mean, balance of power is not constant. It keeps changing. And we continue to explore whatever we need to do to maximize the windows being opened by constant shift in the tenancy at the various tower costs. Finally, on the 10-year question, AI is one of our best performing markets, and I guess the market is doing very, very well. More work requires to be done on the mobile money business where a person is clearly dominant. But when you take away the mobile money business and focus on the GSM only, I've seen any considerable progress in the last couple of years. And there's no reason why this wouldn't continue in Kenya, which is one of our largest markets.

Sorry, John, what was the question on CapEx?

Yeah, so you give us capex by geography, but only for mobile services. The same way that you give us consolidated numbers by geography, you don't actually give us consolidated capex, or you used to, but you've stopped doing that. I just sort of wondered whether you might give it on request at least.

Firstly, let me clarify.

$312 million capex which is spent in H1 includes GSM, mobile money, IT, PSV, everything put together. That's a total capex which we spent, which includes the GSM, mobile money, sensor distribution, PSV, and IT. So, what else breakup you need?

No, I understand. Yeah. I'm just trying to figure out operating cash flow by region. So we have the consolidated EBITDA in Nigeria, for example, but we don't have the consolidated CAPEX in Nigeria. We only have the wireless services. Anyway, I'll take that offline.

We take it offline, John, because we don't break up capex on Ertugmani by region.

But I can give you three numbers you can note down. Nigeria total capex is $12 billion for the first half. East Africa, $111 billion. And Franco, $80 million. That takes us to total $312 billion.

Fantastic. Thank you.

The next question we have is from Mitranger Singh of HSBC. Please go ahead.

Hi, thanks for taking my questions. Just a few questions from my side. Firstly, follow up on the diesel cost and its impact on the Nigerian margins. If you could quantify how much of the margin uplift was because of lower diesel cost, that would be quite helpful. And then secondly, you talked about the FX repatriations and so on from Nigeria. I'm just wondering how is your access to FX overall, especially post the liberalization of the FX rate? Are you able to get enough dollars for your capex and how is that change your CAPEX budget in Nigeria, if at all. If you could talk about that, that would also be helpful. And then finally, just wondering about any update on the price hike, which was supposed to come through in Nigeria. Is there any hope for that or that should be put into the bin now? Thank you.

The price increase in Nigeria. Let me start with the last question about the price increase in Nigeria. But it's important for me to explain our philosophy to you very clearly. We We really rely on usage increase to drive revenues. We rarely use price. Of course, if there is a budget for pricing, we do take pricing. But our growth algorithm doesn't really depend on pricing per se to offset a part of inflation. We like to drive a much faster increase in usage levels, whether it's voice, whether it's data, whether it's mobile money. consumption and that's what we've done in each of our fortune count in the last quarter in the last many quarters so if there's an opportunity for pricing we'll take it but that's why the fact that there is no yield increase in pricing in Nigeria we've managed to deliver 20% growth in the first half of our financial year and we continue to just drive operating efficiencies we continue to use our various affordable price points, we continue to expand our 4G network to really drive increased usage of data, usage of voice, and usage of our very nascent ESG opportunity to increase revenue. And as we continue to engage regulatory authorities on price adjustment when required. Your second question is on FX repatriation. Yes, it's been impacted like It's common thread. The William Bayer-Williamson scenario in Nigeria is not really increasing liquidity. But we're not shy of investing in Nigeria. We're a long-term player in the country. We continue to believe in the long-term viability of Nigeria. We've not slowed down any of our investment that we plan for Nigeria. We continue to put money behind a 4G network, behind a fiber infrastructure. We put it in a data center in Nigeria. So, yes, it's slowed down in terms of dollar liquidity. But let's at least slow down. We've not slowed our own investment in the country because we're a long-term player in the country. And Gary will talk about the migration question. Gary, the question.

Yes. So on the diesel, I'll give you a broad sensitivity. The benefit of quarter two because of the fuel price drop was roughly about $10 million in Nigeria. The other sensitivity is that every 10% increase in Nigeria fuel price, diesel price, impacts us about $4 to $5 million a quarter. Every 10% change, which is roughly about 0.3 to 0.4% of overall Airtel Africa EBITDA margin. So that's the sensitivity from the current diesel price because it is It has moved so many times and so much fluctuation happened. It's very difficult to point out exactly what is the impact, but broadly it's about a percentage point in benefit which we got in Nigeria P&Ls, a 1% margin improvement in Nigeria because of the diesel price drop which happened in quarter 2. Having said so, in October we have started seeing now the price has again gone up. Thank you. Thank you. Does it answer your question?

Yes, yes. Thank you. Thank you very much for your answer. That is very helpful. Thank you. All right. Thanks.

The next question we have is from Roy Tamodi of Citi. Please go ahead.

Hi. Thank you for taking my questions. Most of them have been answered. Just two questions. Firstly, on Francophone, the growth rate, particularly in Francophone, has declined. Now, I know in past you mentioned that it's been underinvested in 4G and you are investing and catching up on 4G. What's the situation now? Why the growth rate has been declining in Francophone countries? Secondly, I just wanted to understand your contract with AMT. Towers where you are anchor tenants, do you get any kind of discount if you have additional tenancies coming in on your lease rates?

Thank you. On the Franco countries, I mean, we continue to invest in 4G networking in those Franco countries. In the last quarter, in the last second half year, we've had a number of initial political developments in a few of the countries in Franco, and those political developments affected our business. We're more or less, I mean, off those political developments now, and we expect our business to return to normal levels of growth. But, yes, we did have an impact from Franco. political developers in two of the countries in opportunity in Franco Africa and those developments did affect our business in the last half year. For the Tahaco.

Yes, if there is a second tenant, then depending on which country, which tower company, obviously the percentage varies, but we do get a second tenancy benefit whenever there is a second tenant coming in the site.

Thank you. The next question we have is from . Please go ahead.

Thank you. Thank you for the opportunity to ask questions. My question will be around the reference exchange rates for conversions. I think your report says the reference rate was that of the closing as of June 30th. But to my mind, I would expect that, you know, the conversion rates would probably be the average period, say from April to September. So I just want to know what goes into informing your reference extremely that as it pertains to Nigeria.

Okay, so let me answer that question. So what happens is when you come to the P&L, we take the average rate and there is a reason for that. Keep in mind that Nigeria books are maintained in local currency. Every country, the books are maintained in local currency. So based on daily rate, you are supposed to restate, which is impossible to do. So what we do is we do take the opening and closing rate of the month. or opening and closing rate for the quarter. So that's what is referred as an average rate. Technically, if you do the restatement every day versus this average rate, there will be hardly any difference. It will be very similar. So when we convert the local currency book into the USD, we take that average rate for the month and we apply that. However, the dollar liability which is there in the balance sheet On a particular day, let's say in this case, let's say 30th September, or if you remember quarter one, when we restated our books as on 30th of June, we restated that based on the spot rate of that day. And the spot rate of 30th June was 752. That's why if you recollect, we had a $471 million of impact, which was shown in the exceptional item as a part of the finance chart. So that is the restatement or revaluation of the value-shaped liability, which are dollar liability, and that impact is taken in the finance expense line item. So the P&L is based on average rate. The dollar liability is based on the spot rate of the last day of the month, and that is what we convert, and that impact is taken in the finance expense.

All right. Thank you.

Thank you. The next question we have is from Curtis Schacht of Sustainable Capital. Please go ahead.

Hi there. Thank you very much for taking the time. You guys have mentioned over some of your previous calls that you've been looking to shift your cost base from hard currency to local currencies. It would be great just to get an update where you are in that process. Also to understand the key areas where you're focusing that on and is that perhaps linked to the shift in bargaining power with the tower companies that you mentioned earlier in the call. Thank you.

Sir, can you say that again? Dollar optics versus dollar currency optics.

So, currently, at an overall Africa level, if you take our dollar optics, it will be in the range of 7, between 7 and 8, 9%, not more than that. We have been over the period of last few years we have been constantly working on reducing the dollar peg operating expenditure so that this impact is not very significant and that's what you can also see in our EBITDA margin. That's what our EBITDA margin we have been able to sustain not much impact on the in the margin because we have a very little left now on the dollar peg OPEX. Where you see the impact maximum coming is wherever we have either a dollar loan or a part of finance fees obligation, which is dollar pay. Payable in local currency, but it is dollar pay. So dollar loan or derivative and finance fees obligation, the portion which is dollar pay, these are the, this is the liabilities which need to be restated or revalued. on a particular day of the closing day of the quarter. So that's what we have to restate it. And that's why the impact is what you have seen when Naira devalued from to 752. That's why the whole impact hit us in quarter one. This quarter, Naira devalued from 752 to 774 or so. So the impact is much lower, only $35 million kind of impact. so this is the this is where the the impact what you see in the pnl the liability restatement but in the overall pnl up to margin level our impact is very very less or little at this moment but we continuously work on uh even even to uh to to ensure that that 97 to 9 also keeps coming down And whenever we are able to source dollar, we will pay the foreign currency debt as quickly as possible so that the foreign debt devaluation risk is mitigated.

Great, thank you. I mean, perhaps as well, if you could just expand on, you know, when mentioning the shift in power from the talkers to the tower companies. Perhaps just if you can comment, you know, how you see that playing out in the future. I mean, will it result in low lease rates or, you know, just trying to get a sense of how the market will shift going forward.

In terms of what we see for power from a relative impact. You know, the construct of the Tawako contracts, I mean, differs from one telco to another telco. It depends on what you start with and whether you've sold your towers to the Tawako or just, I mean, a strict lease agreement between you and the Tawako. So depending on the structure of the underlining contract, there are various routes you can take when the contract expires. And I believe one of our competitors has exercised, I mean, his right to change, I mean, from one Tawaku to another Tawaku. What we continue to do is to look at the construct of that a lot more of the source currency from a hard currency to soft currency. Our preference is to move as much as possible of the renter from dollar into local currency. We continue to do this. Our preference is also to continue to share the impact of the increase in price of diesel. We continue to work with the targets of this. Also for ways of changing from a fusible energy to renewable energy, use more of batteries, use more of solar panels. We continue to work with Atago now to really have a basis for sharing the cost of this investment in order to reduce operating expenses. So there are various demands that can be pulled, and each one depends on the particular circumstances of the So it's not one card for every Tawaku and for every other country continuing to apply different labels depending on the circumstance we're in in the country.

Excellent. Thank you.

Thank you. We have no further questions from the conference call, and I would now like to hand over to any webcast questions.

So, Segun, one question from the web. If you could expand a little bit of what can be done commercially, operationally in Nigeria to offset the recovery impact from the Niagara devaluation?

There are two things that are possible. One is to continue to do a top-line. We continue to do a very strong W2. how we move most of our open slides from foreign currency to local currency. In Nigeria, there's about 7% of Those are fairly more difficult to address. In terms of the above EBITDA line, we've been able to really contain the impact of the currency devaluation on EBITDA. But below EBITDA, which is where we have the finance costs slightly more difficult, given the fact that we have to continue to pay the vendors and we're not slowing down on our investment in Nigeria. Thank you.

And there are a few questions now on the Naira devaluation, which I'll try to summarize. So if you can summarize the different components of the Naira devaluation, on EBITDA and on finance costs, which come from the devaluation of the foreign currency revenues in Nigeria, and including why the impact on EBITDA is high and revenues higher today compared to June.

Okay.

So, this is your reference to the sensitivity of Nigerian. Yeah.

So, as I explained a couple of questions back, when we convert the P&L, we convert it based on the average rate and both the revenue and a margin, EBITDA, operating profit, everything gets divided by that average rate. So, While you see that there is a, we have given that sensitivity that if we take the full year impact based on the 30th September rate of NIDA, the full annualized impact is roughly about 900 to 950 million dollar drop in the revenue line item and about 400 to 450 million which is roughly about 10% of the revenue drops that comes in the margin. Now, But the margin percentage continues to be at the same level because it's an almost similar amount of drop, which also establishes the fact that just now what Shethun has explained and I have also explained that our dollar denominated office is insignificant and that's why you don't see the margin drop because it's a denominator applicable for both revenue and EBITDA. So that's one part of it. And full year impact, why we said that full year impact if we apply the current rate to 950, because we have seen that first quarter, April and May, we have the rate of 464. And then in June, we started the full month with 464, then it went down to 752. So the average rate for June was coming to some 500 something. then what happened 752 further dropped to 776 but the average rate for quarter 2 is much lower that much lower impact because the average of 752 and 774 is about 760 something 761 or something so that impact came down however you will see this impact continuing for quarter 3 and quarter 4 we have to keep that in mind because The denominator for quarter 3 and quarter 4 will continue to be, let us assume that Naira for that does not devalue. So, it is continuing at 774, but the quarter 3 and quarter 4 will still have a denominator which is 774 or if it for that devalues then the average rate will change. So, that is the sensitivity which we try to give based on the full year number, based on The current rate, the full year impact is about $900 to $950 million of revenue drop and $400 to $450 million of EBITDA drop. The impact of the same, the large part of the dollar denominated liability restatement has already happened. So if Naira further doesn't devalue and if my dollar liability doesn't go up, then there will be no further impact in the finance expense. That's the way it works. If my dollar liability goes up and 774 is the rate for the rest of the year, then only to the incremental dollar liability, I will have a finance expense. But otherwise, there will be no impact in the finance expense if the NIDA continues to be at 774 or 775. And the dollar liability also by and large remain at the same level. No further impact in Q3, Q4. I hope I have been able to explain. It's a complicated subject. Perhaps you can give a broad overview of what type of currency it is. So we have dollar debt. We have to take last two years some dollar debt to cater to the capex vendor. We have a dollar debt. we have a lease liability and we have creditors. So all put together, we have roughly about $780 to $800 billion of dollar liability in Nigeria as of 30th September. So those liabilities have to be restated and that's what you see the impact.

Okay, thank you. And probably the last one, Segun, is around, if you can provide some color around market competition and the trends you're seeing in East Africa and francophone Africa, including some key differences in consumer behaviors in these two markets, if any.

East Africa is a very mature market for mobile money. Africa is the only market in 10 years, so you shouldn't be surprised that we are very mature in the mobile money operations in East Africa. in Uganda, Tanzania, Zambia, Malawi. We are ahead of operations in other parts of Africa, mainly because of the culture of using the mobile wallet in East Africa for payments, for transactions, and a lot of financial progress has been put on top of the traditional mobile money opportunities in East Africa. In French Africa, Franco-Africa, we started, I mean, deepening mobile money services in franco late so very early stages and only a number of countries have the recent levels of mobile money penetration now and when you have such low levels of money penetration you start basically catching culture and maybe using the wallets for recharge of telephone wallets so that's where we are now so the key level is the level of maturity in this capital a lot of entrepreneurs are visible Financial services are available. Loans are fairly mature. Insurance products, saving products have been sold using a mobile money wallet, which is really not available in French-speaking countries, given that mobile money is just a margin in those countries.

Thank you. And there were questions on PSB and price increases in Nigeria, which we've already discussed. So, we need a normal questions operator and we can close the call. Segun, do you have any closing remarks? Yeah, thank you very much.

Just to reassure everyone that this kind of a business, I mean, Really great. We've delivered another set of results despite the very challenging operating environment. In constant currency, we've grown revenue by almost 20%. Our voice revenues are up 20%. Data revenue up 20%. And mobile money revenue up 31%. We've expanded our margin by almost 60 basic points in constant currency, especially in reported currency. All the metrics are pointing in the right direction. It just shows that our strategy is working. And I thank everyone of you for joining us this afternoon. Thank you. Thank you. Thank you.

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