Airtel Africa Plc

Good afternoon, ladies and gentlemen, and welcome to the Airtel Africa 9-month 2025 results update. 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, then zero. Please note that this call is being recorded. I would now like to turn the conference over to Sunil Talda. Please go ahead, sir.

Thank you. Good evening, good morning to everyone, and welcome. Thank you for joining us on today's call. I'm joined on the line by our CFO, Jaideep Paul, and Kamal Dua, our Deputy CFO, who, as you will have seen from our previous announcements, will be taking over from Jaideep as CFO later this year. Alistair Jones, our Head of Investor Relations, also joins us on the call. We will shortly be answering your questions, but first I would like to provide you with a brief overview of our performance over the last nine months, and in particular over the last quarter. Over the last few years, there has been continued volatility in the macro environment, but more recently, we've seen some signs of stabilization, which is encouraging. However, throughout the volatility, demand for our services has been sustained, which really reflects the strong underlying demand across our markets. The ability to provide these critical services, despite the tough macroeconomic environment, is testament to our focused strategy and resilient business model. The strategy we have adopted has continued to serve increased digital and financial inclusion. Smartphone penetration has increased over 5 percentage points over the year, and the 18% growth in our mobile money customer base to over 44 million reflects our focused on providing a wide range of financial services to individuals and businesses that have been previously excluded from the financial ecosystem. These initiatives have translated into strong constant currency results with an acceleration in revenue growth over the last few quarters. Revenues in the quarter reached $1.27 billion, which was a 21.3% growth in constant currency results accelerating from 20.8% growth in Q2 and 19% in Q1. Given the foreign exchange headwinds experienced over the last year, reported currency revenues grew 2.5% in Q3. Before discussing our performance across our two main reporting segments, I wanted to highlight our performance on a regional basis in the last quarter, including both mobile services and mobile money. In Nigeria, we continue to see encouraging trends with constant currency growth of almost 35%. In East Africa, revenue growth accelerated to almost 23% in constant currency. And in Francophone, growth returned to double digit levels at 10.2%, which is an encouraging performance given the acceleration from 5.2% we reported in quarter one. Let me begin by focusing on the performance of the mobile services segment. The trends in the first nine months of the year, and in fact in many quarters prior to that, clearly reflects a sustainable level of growth in this business segment. In the first nine months of the year, constant currency revenue growth of 18.8% once again highlights the low level of SIM penetration across our markets. With our extensive distribution network underpinning the approximate 8% growth in customer base, in quarter three, specifically the customer base Growth and R2 strength drove constant currency revenue up 19.6% and acceleration from the previous quarter. We remain confident that low unique customer penetration levels across our footprint combined with still very low usage mean that there remains a long runway for both voice and data revenue growth across all the three regions. In Nigeria, mobile services revenue grew 35% over the nine-month period, while in East Africa and Francophone, revenues increased by more than 19% and 6% in constant currency, respectively. In Francophone, revenues increased 8.5% in Q3. Let me further break down the performance of mobile services segment between voice and data. Voice, which contributes over 47% of mobile services revenues, continues to be a key driver of the overall trends. Unlike in many other geographies, voice continues to underpin our revenue growth. With revenues growing almost 10% over the period, these trends are largely supported by customer growth as new customers access services for the first time, but also reflects the low level of usage relative to our global peers. However, the scale of opportunity for data services is even more compelling. Data customers increased by almost 14% reflecting the natural pent-up demand for these services. But with a low level of smartphone penetration at just over 44%, a long runway for growth still remains. This combined with data usage per customer growth of over 32% is likely to continue supporting data revenue trends in the future. Enabling this growth is a strategic priority and therefore the investment we have undertaken to ensure great network quality with extensive 4G coverage has been key to unlocking this massive opportunity with over 31% growth in data revenues in quarter 3. The mobile money business continue to see a strong performance with constant currency growth of over 31% in quarter 3 and reported currency revenue growth of 23%. Financial inclusion across many of our markets remain low and we see mobile money as a key facilitator of increased financial service adoption which will support economic growth, and transformation. The transaction value increase of over 30% to $146 billion reflects the continued enhancements we continue to make to the mobile money ecosystem and the continued investments in the distribution network. Reported EBITDA for the nine-month period amounted to $1.68 billion with constant currency growth of 15.3%. The strong top-line growth continues to support our ambition to see margin improvement as operating leverage continues and our cost optimization initiatives drives further efficiencies. In Q1, we saw a combination of factors drive EBITDA margins to a low point of 45.3%, namely rising fuel prices and lower contribution coming from Nigeria. However, from that low point, we have seen a strong recovery in margins to 46.9% in quarter three, a 160 basis on recovery, reflecting the strong progress in cost optimization measures. Despite the macro challenges we've alluded to earlier, we've been able to enhance our reputation as one of the cost leaders across our industry. By leveraging our continued success on cost optimization, we continue to look at options for further cost efficiencies in order to drive further EBITDA margin improvement. Below the EBITDA line, our financial results remain exposed to currency volatility. However, the recent appreciation in the Naira and Tanzanian Shilling did lead to an exceptional gain in Q3. For the quarter ended 31st December, our basic EPS came in at 3.6 cents with EPS before exceptionals of 1.3 cents. In order to reduce volatility in finance cost and as part of a strategy to reduce the balance sheet, we've been focused on reducing the amount of foreign currency debt on our balance sheet. As at the end of December, approximately 92% of our Opco debt is in local currency, which is a substantial improvement from 79% a year ago and reflects the payments of approximately 744 million of foreign currency debt over the last year. While the debt comes at a higher cost, it is considered a much more prudent approach to managing the macroeconomic volatility we experience across our markets, we will continue working to reduce this further. Leverage for the group of 2.4 times has increased over the last year, primarily as a result of extension of our tower lease agreements with ATC, which we announced in October last year. In this quarter, we have introduced another leverage measure, which excludes the impact of lease accounting, which we think better reflects a group's financial market position. Based on this measure, lease adjusted leverage of just 1.1 at one time reflects the existing robust and substantial capital structure enabling our ability to continue investing across our markets and return cash to shareholders. Following the completion of our first buyback, we launched a second buyback program of up to $100 million in December, This buyback, along with a dividend payment made during the quarter, once again highlights our commitment to shareholder returns. Very briefly, I thought it is worth highlighting what I see as a very compelling opportunity in Central Africa. The first point is the strong growth outlook. As I've mentioned before, the scale of growth across the continent is particularly encouraging, given by the structured demographic growth rates, combined with the real opportunity to bridge the digital divide and increase smartphone penetration levels. This opportunity is further enhanced by the ability to drive increased financial inclusion through our mobile money business to promote economic prosperity across our markets. However, I have also talked in the past about the substantial growth available in other areas, and we remain excited about the opportunity in the enterprise space, data centers, and also the home broadband offering. Secondly, a relentless focus on efficiencies and returns will ensure that the flow-through of the revenues will continue to drive profitable growth. Despite the macroeconomic environment, we will continue to focus on the beta margin improvements as a result of these efficiencies. Thirdly, as refresh strategy puts a greater customer experience at the center of everything we do, in order to do this, we continue to invest in our network and improve as well as simplify the customer journeys. Our dearest balance sheet and strong capital structure enables us to execute on these priorities. Importantly, in order to ensure sustained value creation for all stakeholders and to be able to achieve these strategic objectives, the business must be underpinned by a strong risk management framework. Our robust corporate governance strategy is aimed at mitigating risks that we are exposed to. I'm happy to say that our track record speaks for itself. We will maintain this rigorous approach to create value for all stakeholders. And finally, before handing it over to the Q&A, I thought it worthwhile highlighting the recent developments in Nigeria, where the NCC has granted approvals for tariff adjustments. We are very grateful to the relevant authorities for these approvals, which we believe is necessary to ensure the sustainability of the industry and enable us to continue providing reliable and affordable services to our customers. We are aware of the inflationary pressures consumers in Nigeria are facing but see this development as key to maintaining our infrastructure investment to provide a value for money proposition that prioritizes customer experience. And with that, I would like to now open the line for questions for which I'm joined by JD. Operator, I now hand over to you to facilitate the Q&A session.

Thank you very much, sir. Ladies and gentlemen, if you would like to ask a question, please press star then 1 on your touchtone phone. If you decide to withdraw your question, please press star and then 2. Again, if you would like to ask a question, please press star and then 1. The first question that we have comes from Rohit Modi of Citibank. Please go ahead.