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.