Release Date: February 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Airtel Africa PLC (NSA:AIRTELAFRI, Financial) reported a strong operating performance with a 20% revenue growth in constant currency, leading to $3.86 billion in reported revenues over the 9-month period.
- The company achieved an industry-leading EBITDA margin of 49.4%, with EBITDA growth of 21.9% in constant currency terms.
- Airtel Africa PLC (NSA:AIRTELAFRI) saw significant growth in its mobile money business, with a 3% constant currency revenue growth in Q3 and a 35% increase in transaction value.
- The company has reduced its leverage ratio to 1.3x EBITDA from 1.5x, and net debt declined to under $3.3 billion from over $3.6 billion a year ago.
- The board has approved a share buyback scheme of up to $100 million, starting in early March 2024 over a 12-month period, reflecting confidence in the company's financial strength.
Negative Points
- Reported results were negatively impacted by currency devaluations in several markets, including a 22.5% devaluation in Nigeria and a 44% devaluation in Malawi, leading to a 1.4% decline in reported revenues over the 9-month period.
- The currency devaluations resulted in a significant increase in finance costs, impacting the company's EPS for the period.
- Despite strong operational performance, the company's EPS before exceptional items was down 35%, reflecting the impact of currency headwinds.
- The company faces ongoing challenges with high energy costs and FX pressures, which have affected its operating margins.
- Airtel Africa PLC (NSA:AIRTELAFRI) continues to deal with regulatory challenges in Nigeria, including the need for regulatory approval for price increases, which could impact future revenue growth.
Q & A Highlights
Q: Can you provide details on your data center business, including the number of data centers, their locations, and future plans?
A: We have about 48 captive data centers across our portfolio. We are developing two telco-agnostic data centers: one in Lagos, Nigeria (36 megawatts), and another in Nairobi, Kenya (7 megawatts). Construction will take about two years, with operations expected to start in 2025 or 2026. Additionally, we have smaller data centers planned in Tanzania, DRC, and Gabon.
Q: What is the current status of your mobile money business in Nigeria, and when do you expect to start monetizing it?
A: Our focus in Nigeria is on building a strong customer base and agent network. We are expanding our infrastructure and complying with new verification requirements from the Central Bank. We pay agents for cash-in services, which is standard in mobile money operations. Monetization will follow once we have a robust base.
Q: Can you elaborate on the liquidity situation in Nigeria and your strategy for managing debt and refinancing?
A: We have $560 million in cash to repay the Holdco debt due in May 2024. We have upstreamed over $530 million in the last nine months from various geographies, including nearly $100 million from Nigeria. We are reducing our dollar liabilities and have de-dollarized about 79% of our Opco-level debt.
Q: What are your plans for 5G deployment, and how do you see its role in your business?
A: We have launched 5G in Nigeria, Zambia, Kenya, and Tanzania. The primary use case for 5G is home broadband due to limited fiber infrastructure in Africa. While 5G mobility expansion is limited in the short term due to expensive devices, we see significant potential in fixed broadband applications.
Q: How are you managing the impact of currency devaluation on your financial performance and strategy?
A: We focus on maximizing top-line growth to offset currency weakness, minimizing foreign exchange-based costs, and reducing foreign exchange liabilities. Despite currency headwinds, we have expanded our EBITDA margins and continue to invest in growth opportunities.
Q: What is driving the strong voice revenue growth, and how do you plan to sustain it?
A: The low unique SIM card penetration and low voice consumption in Africa present significant growth opportunities. We are expanding our distribution infrastructure and network coverage, which drives customer additions and increased usage. We roll out about 3,000 sites annually to enhance coverage.
Q: Can you provide more details on your CapEx plans and how they are affected by currency fluctuations?
A: Our CapEx intensity remains around 14-15%, with guidance of $800 million to $825 million for this year. We allocate CapEx based on revenue growth potential and investment needs, not currency fluctuations. Despite challenges, we continue to invest in growth markets like Nigeria.
Q: How are you handling the pricing regulation in Nigeria, and what is your strategy for revenue growth?
A: Pricing in Nigeria is regulated, and we engage with the regulator for appropriate pricing. However, our strategy focuses on customer additions and increased usage to drive revenue growth. We continue to expand our network and distribution infrastructure to support this strategy.
Q: What is the cash impact of the derivative losses recorded in your P&L?
A: Derivative instruments are marked to market, and the cash impact is realized upon unwinding the instruments. The actual cash impact depends on the rate at the time of unwinding, not the provision created in the books.
Q: Can you explain the significant investment with banks shown in your cash flow statement?
A: The $840 million investment is the trust account balance for Airtel Money, which represents customers' money kept in trust accounts. This is restricted cash and not available for general use.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
