Release Date: July 25, 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 19% revenue growth in constant currency terms, reaching $1.16 billion in Q1 '25.
- EBITDA margins remain strong at 45.3%, despite inflationary pressures and currency devaluation.
- The company continues to be a cost leader and the most profitable mobile network operator in Africa.
- Significant growth opportunities identified in fiber, home broadband, and enterprise business segments.
- Strong performance in mobile money business with 28% constant currency revenue growth and a 29% increase in transaction value.
Negative Points
- Reported currency revenues declined by 16.1% due to significant currency headwinds.
- Inflationary pressures, particularly rising diesel prices in Nigeria, have negatively impacted EBITDA margins.
- Foreign exchange fluctuations resulted in derivative and foreign exchange losses of $136 million, primarily due to naira devaluation.
- Francophone region experienced pressure on consumer spend from inflationary and competitive pressures, impacting growth.
- Regulatory charges and MAT-related expenses in some Francophone countries have further impacted EBITDA margins.
Q & A Highlights
Q: Can you explain the key reason for the pressure on margins in Franco Africa? Is it also due to diesel prices, or is that specific to Nigeria?
A: The pressure on margins in Franco Africa is primarily due to overall inflation impacting network costs and increased regulatory charges in some countries, such as Gabon and DRC. This, combined with a slowdown in top-line growth, has affected EBITDA margins.
Q: Can you elaborate on your efficiency program, given that your margins are already high in most markets?
A: We are focusing on reducing network costs, particularly fuel costs, through initiatives like solarization of sites and using lithium-ion batteries. We are also optimizing network utilization and renegotiating key contracts to drive further efficiencies.
Q: What progress have you made in discussions with Nigerian authorities regarding potential tariff changes?
A: We continue to engage with the NCC and other authorities to seek price increases to cover inflation. However, our primary focus remains on acquiring customers, delivering great customer experiences, and driving top-line growth.
Q: Do you have enough growth levers in Nigeria to regain lost revenues in dollar terms, and how quickly can you recover?
A: We remain optimistic about Nigeria's growth potential, focusing on customer acquisition, network expansion, and leveraging opportunities in home broadband and B2B segments. We will continue to invest judiciously to maximize revenue growth.
Q: What is the progress on the mobile money unit's IPO plans?
A: We remain committed to our promise of an IPO within four years of our first transaction. We are working towards meeting this deadline and will share progress as we get closer to the timelines.
Q: Given the current market conditions, do you think achieving similar EBITDA multiples for the mobile money IPO is possible?
A: It is too early to speculate on EBITDA multiples. We will have a better understanding as we progress through the year and engage with bankers.
Q: How do you view the revenue growth trajectory in Francophone markets given the recent slowdown?
A: Despite the slowdown, underlying metrics like base growth and data consumption remain healthy. The slowdown is primarily due to high inflation and competitive pressures. We remain confident in the market's ability to turn around and deliver better growth rates.
Q: Can you provide more details on your fiber investment plans and specific markets where you see opportunities?
A: We see significant opportunities in home broadband and enterprise segments. We are testing FWA with positive initial results and will deploy fiber as demand grows. We are also investing in infrastructure and GTM capabilities to service enterprise customers.
Q: Have you seen any change in competitive intensity in Nigeria given MTN's reported issues?
A: We have not observed any reduction in competitive intensity in Nigeria. We remain focused on leveraging opportunities in both GSM and mobile money businesses.
Q: At what point can we start including mobile money revenue in Nigeria in our projections?
A: It is difficult to specify a timeline, but our efforts are focused on building a strong ecosystem and engaging customers. We will provide more concrete numbers as we progress.
Q: Can you provide a breakdown of the profitability of different mobile money revenue streams?
A: Cash out commissions contribute 48% of revenue with a yield of about 2%. P2P services contribute 12% with a yield of 0.5%. Bill payments and merchant services contribute 14% with a yield of 1.8%-1.9%. Recharge commissions contribute 30% with a yield of 6.5%-7%.
Q: What percentage of your lease contracts will be renewable next year, and what impact do you expect?
A: Between 12 to 18 months, lease renewals are due in about four to five countries. We are currently engaging with tower companies for contract renewals and will provide more details as negotiations progress.
Q: What was the quarter-on-quarter change in fuel prices in Nigeria?
A: In Q4, diesel prices were over 1,400 naira per liter, which decreased to 1,150-1,200 naira in Q1. The impact of Q4 prices is reflected in Q1 due to a one-quarter lag in contract obligations.
Q: Can you quantify the impact of DRC-related expenses on Francophone EBITDA margin?
A: Minimum Alternate Tax (MAT) expenses in DRC and Nigeria amounted to about $5.2 million in Q1, with DRC contributing roughly $2 million. This will continue at about $2 million-$2.5 million per quarter.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
