Airtel Africa Plc

Good day ladies and gentlemen and welcome to the Etal Africa Q1 2027 results. All participants will be in listen only mode. There will be an opportunity to ask questions later during the call. If you should need an operator assistance during the call, please signal operator by pressing star and then zero. Please note that this event is being recorded. I would now like to hand the conference over to Sunil Tildar. Please go ahead, sir.

Thank you very much and a very good afternoon. Good morning to everyone and welcome to the call. Thank you all for joining us on the call today. I'm joined on the line by Kamal Dua, our CFO, and Alistair Jones, our head of investor relations. We will shortly be answering your questions, but first I would like to provide you with a brief overview of the quarter's performance. I'm very pleased to report another strong quarterly performance which reflects the continued underlying demand across our business and the sustained focus execution enabling us to capture the opportunity. Key to this performance has been our focus on providing a best-in-class customer experience and the results reflects the benefits of our long-term investment strategy which continues to deliver value to all our stakeholders. We delivered strong growth across voice, data and mobile money, supported by an acceleration in the customer base growth across all segments as adoption of digital and financial services continues to gather momentum. At the same time, we have accelerated investment in our network to strengthen coverage and capacity, ensuring we remain well positioned to capture the significant growth opportunities across all of our markets. Group revenues reached $1.85 billion, growing by over 21% in constant currency, despite no longer benefiting from the Nigerian tariff adjustments, which underscores the breadth of growth opportunities across our markets. With a more stable macroeconomic environment supporting an appreciation in most of our currencies, this translated into reported currency growth of 31%. This level of growth is not specific to just one sector. This is a broad based trend reflected in the strong performance of both the mobile services and mobile money segments. The mobile services segment recorded constant currency revenue growth of 19.1% as our customer base increased by 11.6%, an acceleration from the prior quarter. The ability to grow our customer base by this amount showcases the sustained demand and low levels of SIM penetration across our markets. Key to our strategy is driving increased digital adoption, and one metric we constantly track is smartphone penetration. We've seen smartphones on our network increase by over 24%, with penetration increasing by over 5% to 51%. This increased adoption of these smart devices continues to translate into strong data traffic growth across our network. driving data outputs up by 10.3% in constant currencies and data revenue, increasing by 27.2% in the period. The mobile money business remains a key pillar of Group's existing and future growth potential. The quarter's performance was another example of the scale of the opportunity before us and of our team's ability to continue capturing this opportunity through strong execution, ongoing innovation and a relentless focus on increasing over 51% in reported currency. As we continue to expand the ecosystem to drive more use cases, increased customer engagement and expansion of our digital offerings. Mobile money revenues grew by 25.8% in constant currency, despite the ongoing impact arising from the intra-group agreement changes. On a regional basis, the growth rates also read well. In Nigeria, revenues increased by 29.8% in constant currency and over 50% in reported currencies. This quarter the growth rates do not incorporate any benefit arising from the tariff adjustments, reinforcing our confidence in the long-term growth potential of the Nigerian business. East Africa revenues increased by 17.8% with robust trends across all segments and Francophone Africa growth of 18% continues to reflect the step up in investment over the last few years and the strategic focus which has helped sustain this high level of growth. While our strong revenue growth demonstrates the demand for our services, it is equally important to highlight how this growth is translating into profitability. Let me now turn to our EBITDA performance and the factors impacting it during the quarter. In the quarter, we've maintained EBITDA margins of over 50%, with EBITDA of $928 million, growing 24.4% in constant currency and 36.6% in reported currency. EBITDA margins increased by over 200 basis points over the prior year which again reflects the strong revenue growth and the sustained focus on our cost optimization initiators which is transferring to real savings across the group while not compromising on our ability to capture the revenue opportunity. Our quarter one EBITDA margin of 51.1 percent reported in quarter four of last financial year, but clearly showcases our ability to offset a large portion of the rising fuel costs through a continued focus on cost initiatives. As we noted at the time of full year results, the developments in the Middle East have resulted in a steep increase in fuel costs, which has impacted the margins during the quarter. However, we will expect to see a further increase in margin pressure as the higher energy costs are captured into many of our tower contracts in quarter two. While there may be some pressure on margins in the near term, we retain our relentless focus on further cost efficiencies supported by continued revenue growth that should help moderate this effect. Despite a strong balance sheet and very modest leverage of 0.5x, we have continued to actively optimize our debt portfolio. Coupled with a more favorable interest rate environment and an improved currency mix of borrowings, our effective interest rate declined by 282 basis points to 10.1% at the end of the quarter, lowering our overall cost of debt and further strengthening our financial position. Excluding exceptional items, our earning per share came in at 5.4 cents, up 57% over the year, which reflects the success I've been discussing. with basic EPS of 4.4 cents in the period, a growth of 27.3%. One of the most important aspects of this set of results is our capex spends. We have reported capex of $389 million in quarter one, a substantial increase from the $121 million in the previous year and reflects our increased capex guidance, which we set out at the beginning of the year. This accelerated capex spend is a very clear part of our strategy where we continue to see a substantial opportunity for growth and it is right that we accelerate spend in order to capture this growth. We have therefore purposely brought forward investments into quarter one as we proactively invest ahead of demand. This capex is actively focused on the quality of network experience for customers with coverage and capacity remaining key components of the spend. Furthermore, new and emerging opportunities in enterprise, HPV and data centers continues to be a focus as well. We remain compelled by the opportunity to continue investing across our markets as we continue to see benefits accruing to our business. Importantly, despite the significantly higher cap expense over the year, we have maintained a similar level of operating free cash flow in the quarter compared to the previous period, reflecting the strong trends in both operating and financial trends. I know many of you are interested in our IPO of the aerial money business. And so before handing over to the Q&A, let me give you a brief overview of where we are with the IPO. The first thing to say is we are progressing very well with our preparations and our intention remains to undertake the IPO during 2026, subject to market conditions. Following an extensive review of the major listing venues, we can confirm that London is our preferred listing location. As many of you know, London provides access to a very broad international investor base with a strong experience of investing in emerging market assets. but also a strong understanding of the fintech and payment sector providing a suitable platform for Airtel money to be valued appropriately. Over the next few months, we will be updating the market at the appropriate time of the expected timeline and structure of the IPO in accordance with the regulatory and disclosure obligations. Before I hand it over to the Q&A, just to summarize a few key points. Firstly, these were strong results with constant currency revenue and EBITDA growing by over 21% and 24% respectively, translating into 31% and 36.6% reported currency revenue and EBITDA growth. The structural demand for digital connectivity and financial inclusion remains very compelling. The foundation is expected to continue supporting the financial and operating momentum in the near to mid-term. Airtel Money continues to scale with strong results reflecting the truly unique business opportunity and we look forward to providing more detail on the upcoming IPO of Airtel Money later this year. And finally, we have accelerated our investment to capture the significant growth opportunity that is available to us and we believe this will put us in a much stronger position to showcase our ability to capture the structural growth potential. We're excited by the future and we see a unique opportunity to sustain strong levels of growth going forward through the continued and consistent deployment of our strategy. We look forward to reporting on our successes in the future and continuing to generate value for all of the stakeholders. And with that, I would now like to open the line for questions for which I'm joined by Kamal. Operator, I now hand over to you to facilitate the Q&A session, please.

Thank you, sir. Ladies and gentlemen, if you would like to ask a question, you may press star and then 1 on your touch-tone phone or on the keypad on your screen. You will hear a confirmation tone when you have joined the queue. Please note if you do wish to withdraw your question, you may press star and then 2 to remove yourself from the question queue. Once again, if you wish to ask a question, you may press star and then 1. The first question we have is from Rohit Modi of Citi. Please go ahead.