Release Date: May 09, 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 20.9% increase in constant currency revenue for the year.
- The company achieved a 9% growth in its customer base, reaching 153 million users.
- EBITDA grew by 21.3% in constant currency, demonstrating strong operational performance.
- The company has successfully launched 5G services in five markets, enhancing its technological capabilities.
- Airtel Africa PLC (NSA:AIRTELAFRI) has significantly reduced its foreign currency debt, improving its balance sheet resilience.
Negative Points
- The company faced severe currency devaluation in key markets, particularly Nigeria, impacting reported revenue and EBITDA.
- High inflation and rising energy costs have put pressure on the company's margins.
- The macroeconomic environment remains challenging, affecting consumer spending and operational costs.
- The devaluation of the Nigerian naira resulted in a significant foreign exchange loss, impacting the company's financial results.
- The company anticipates further impact from diesel price increases in Nigeria, which could affect future margins.
Q & A Highlights
Q: Given there is a deferral of capex plan from last year to next year, your capex plan looks like it's declining a lot from your guidance last year. What exactly is driving this? Is this specifically driven from one country or any other areas that you would like to highlight?
A: Last year capex had some balances for data center investment. This year we provided for around $40 million in the second, [27, 30, 40] guidance we’ve given. So more or less, it will be essentially the same for capex, if you exclude the special money we set aside for the data center. We continue the significant investment in Nigeria our largest country. But we still have a laser focus on continued investment in every one of our markets.
Q: On your margin guidance. The margin impact from diesel cost in 4Q in Nigeria. Given the Nigerian margin was flat, if there was no diesel impact, what kind of diesel price impact do you expect the next year in Nigeria in terms of how much decline do you expect in Nigeria in terms of margins?
A: The diesel price has moved, especially on quarter four, the full impact of that, unless the diesel price improves in quarter one, there is an additional impact which is expected in the range of between $25 million to $30 million approximately additional impact, which will flow through in quarter one. However, we are taking certain mitigation action to see how we will neutralize that impact in quarter one. Or if not quarter one, by at least quarter two.
Q: If you can please guide around what would be your run rate for cash lease repayments next year, given you had an IHS contract recently done. What kind of impact do you see overall? Does your lease cost grow substantially next year or it remains slightly up from this year?
A: The renewal impact of the five-year renewal which we have done has been fully factored in, in the lease liability. On that contract, there is no additional impact on the lease liability. But as you know that, because we follow IFRS 16 accounting, so all the new sites, as and when it gets added, that increases the lease liability. But at the same time, we also pay off the lease liability which is due during the year, so that payment goes. Next year we don't have renewal of the old sites, but following year we will have a renewal coming up for the sites which we sold off during 2014, '15, '16.
Q: On the performance in Francophone Africa market. Just wondering what was the reason behind the softer performance there? You talk about MTR cuts, I think there was some issues in Gabon, as well. If you could quantify these separately and, also, whether you think these impacts are temporary in nature or do you think the impacts will be lingering on for the next year?
A: We've seen some slowdown in Franco. This is driven by intense competitive pressure in two of our key markets, this is driving the industry taper down. I believe this is temporary. I think the race to the bottom line is not sustainable and this will be reversed when all of us decide to now compete on further reversal in price. We've put a number of measures in place to mitigate this outcome of the competition. And I'm very confident that the impact will be fully mitigated.
Q: Any comment you can make on the pricing environment or actions you have taken during the quarter. Have you had any update from the regulators on a potential price hike? And your approach around pricing, has that changed at all?
A: We don't depend on pricing for driving revenue, we basically use consumption. We like our consumer to consume a lot more minutes, they consume a lot more data, and to use us for mobile money transaction as our way of growing, we don't use price. Of course, when there's opportunity for pricing you do see that we use price to drive ARPU, but our key focus is our client usage and providing affordable data products, affordable products and making our mobile money opportunity accessible to all.
Q: Are you still on to list mobile money sometime next year now?
A: We didn't give a guidance, we gave you an idea of the mobile money business within four years of the initial minority deal. Four years, one year to go, that's going to be sometime next year, beginning of next. We stand by that guidance, we've not changed that guidance, so that is the short answer to that. The guidance still stands, we still plan to IPO the mobile money within four years, four years will end sometime next year.
Q: Of your 205,000 agents in Nigeria, how many of those are performing OTC transactions?
A: All of them are active, that’s why we call them agents. If they’re not, we don't report them. So the 205,000 agents, are active agents and they do cash in and cash out.
Q: Could you give us more color regarding the major revenue generation for sales for MoMo in Nigeria and the transaction value that you've been able to deliver so far?
A: The major use case for now is recharges, that is the first products you adopt when you enter the mobile money space. You do cash in, chase out, we also recharge our customer. It works for everyone, it's easier and more convenient for customers and agents with money. It's also easier for us in terms of deploy recharges.
Q: Which transactions have been impacted or do you expect to be impacted by the cybersecurity levy that is expected to come out in a couple of weeks?
A: It was announced couple of days back, we’re not very clear where it's going to operate. Basically, it will be on P2P transactions. I presume if you move money from your wallet to another wallet it might be impacted, but I must confess, I don’t know how accurate is this. Once again, my team in Nigeria is analyzing the full impact of this on our business and as soon as we have all the information we will come back and let you know on that.
Q: On the AMC listing, the last communication we had is the FY23 report, indicated that Nigeria, Tanzania and Congo are not part of the OpCos under AMC. Just wanted to confirm that when the listing is happening next year, will we see this be excluded or is there a path to get them included in the listing?
A: We said we’re going to list next year, we’re going to list when we have all the countries in the envelope. We’re still a year away from that time, so I can't make any more comment on that beyond what we've said,
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
