Conference call transcript 23 October 2020 H1 2021 RESULTS Operator Ladies and gentlemen, welcome to the H1 2021 results conference call of Airtel Africa. Today’s speakers are Raghunath Mandava, Chief Executive Officer, and Jaideep Paul, Chief Financial Officer. All lines are now closed except from the speaker line. If you would like to ask a question to the speakers please press * then 1 on your keypad to connect with the operator or ask a question via webcast using the textbox on the screen. Please do note that first we will take questions asked via the phone and later on via webcast. Before we continue I will present an important disclaimer. This presentation has been prepared by Airtel Africa Plc and is for information purposes only. This presentation contains forward looking statements which by their very nature involve inherent risks and uncertainties. Risk exists that such forward looking statements will not be achieved. You are strongly advised to review the disclaimer page of the investor presentation available at airtel.africa/investors. This conference call will be recorded, and the transcript will be posted on the website. The first speaker will be Mr Raghunath Mandava. Please go-ahead sir. Raghunath Mandava Good morning everyone and thank you for joining the call. Today we have announced our H1 results. I will take you through the business areas and Jaideep will cover the numbers in more detail. H1 2021 results are a clear evidence of our strategy delivering profitable growth. Our revenue grew by 16.4% in constant currency with EBITDA growing even faster. Thereby we delivered a margin expansion of 110 basis points in constant currency terms. We delivered 13% revenue growth in Q1 which expanded to 19.6% growth in Q2 in constant currency. Revenue growth was broad based across all services, voice, data and mobile money. Our EPS pre-exceptional items amounted to 3 cents. Finally, we continue to improve our cash position with FCF at the level of $319 million, up 52%, largely driven by the growth in EBITDA. We keep our aspirations announced at IPO and we continued to make good progress this year. In the first half of this year we grew mobile revenue by 15.3% and mobile money revenue by 30.4%, and increased the underlying EBITDA by 110 basis points to 44.7%. Moreover, we kept our capex broadly stable in H1 2021 at $216 million and we decreased our leverage to 2.2x. Capex in the first half was slightly below that of last year due to the lockdown effects, but the full year outlook remains the same at $650 million to $700 million. The board has declared an interim dividend of 1.5 cents in line with our new progressive dividend policy. Jaideep will talk about it a little later. This slide sets the stage as to how our strategy delivers. As mentioned before, unlike anywhere else in the world we in Africa have an opportunity to deliver growth across voice, data and mobile money. Unique 1 customer penetration at about 46% means there is an ample scope for customer growth, and we have been growing customers in double digits. The customer growth for this half year was 12%. Voice ARPU dropped slightly due to interconnect rate reduction in some countries, but overall voice revenue grew 7%. Data growth of 33.4% is coming from a 24% growth in customers and a 10% growth in ARPU. Current smartphone penetration is 33.2% and 4G penetration among the smartphones is at about 30%. This is an important parameter for continuous growth of data. Airtel Money grew by 30.4% as we expanded our service portfolio to more customers, resulting in the customer base growing by about 30%. The ARPU growth has only been 2.4% due to a lot of free giveaways that we gave during the pandemic period. Data and mobile money, the growth engines, now account for 30% and 10% of our revenues. That means 40% of our revenues are actually growing at about 30% plus and driving growth, along with voice which is also in good mid-single digits. This is a clear demonstration that in the countries we operate there is growth in voice, data and mobile money resulting in both customer and ARPU growth. Let us now move to the regions. Nigeria, our largest market, continues to deliver very strong growth thanks to the continued growth of network distribution and infrastructure. East Africa was the fastest growing region in this period. Five out of six countries are growing more than 20%. Our revenue increased 21.9% and EBITDA growth of 35.1% year on year. Francophone Africa has turned around. The performance continues to improve largely driven by growth in data and mobile money, while it has been partially offset by voice. Jaideep will take you in detail through the segment performance. COVID-19. These results that you’re seeing for the first half clearly show the resilience of our business and the effectiveness of our strategy as well as recognising most importantly the fact that the services we provide are essential to customers and economies. In these unprecedented times the telecoms industry has emerged as a key and essential service in these countries. Allowing customers to work remotely, reduce their travel, keep them connected and allow access to affordable entertainment, mobile has become an affordable alternative for travel and communication during this difficult time of pandemic. In the first half we delivered a strong set of results, and as lockdown restrictions eased during Q2 our performance continued to improve with constant currency growth of 19.6%, up from a 13% growth that we presented to you for Q1. We remain alert to the potential for further disruptions from a second wave of COVID-19 across Africa and the associated actions by governments to minimise this contagion. Nevertheless, we are in a strong financial position to capture the growth opportunities presented by promising underlying macroeconomic and demographic trends in a fast growing region that is vastly under-penetrated in terms of mobile and banking services. Moreover, we recognise the progression of Q2 versus Q1. We remain confident of delivering long-term sustained growth for our shareholders. Let me now move on to the strategic part of what we’ve been doing. You would have seen these six pillars of strategy. Just to remind you, it’s about winning with the network, winning with customers, winning with data, winning with mobile money, and then win with cost and win with people. There are further areas of upside and our philosophy that we are providing essential services 2 and hence partnering a nation helped create a good platform for our business growth. Our strategy is to continue to grow our network while becoming a leading 4G player. 87% of our sites are now on single RAN technology, which means that you can upgrade from 2G to 3G to 4G with a software switch. This, along with our fibre investments that we have put in enables us to generate huge incremental capacities at very low marginal cost. We added more than 2,300 sites and now 70% of our sites are on 4G, with three countries almost at 100% 4G level. Our total fibre is 44,000 kilometres across our footprint with connectivity between the east and the west coast of Africa. This has resulted in us having a network that we can allocate a greater number of carriers on spectrum to data and specifically to 4G through software upgrades, resulting in creating further headroom for accelerated growth, thereby be the preferred smartphone network in Africa. Not only do we have enough headroom in our current capacity but also the flexibility through software upgrade to add more carriers and more capacity in our network. In H1 2021 we continued the accelerated customer acquisition through our exclusive and dedicated distribution channels. Our customer base has reached 116 million, which is a 12% growth year on year. We also continued expanding our distribution network with a strong focus on both recharge and SIM card availability especially in the rural areas. This has benefitted us a lot during the pandemic when lockdowns and mobility got restricted. This along with the simple offerings helps us to increase usage per customer. You will notice from the above table that data customers are growing at about 24% with an ARPU growth of about 10%. This has helped us grow the revenue at 33%. You will notice that the 4G contribution has grown to 30%, helping our average data ARPU from $2.30 per customer to $2.50 per customer. This growth of ARPU has come from a 57% increase in data usage per customer. A 10% ARPU growth at a 57% usage in customers, this is why I was explaining to you about the huge incremental capacities that we are capable of building and adding more. Our data consumption has grown to 90% fuelled by usage of higher value bundles and home broadband. As you would be aware, we have spoken about how we have launched in a big way wireless home broadband, and this is adding big high-value customers and high-value consumption. 4G customers have contributed to only 10% of the overall base but over 50% of the overall data consumed. Mobile money is a strong growth opportunity we have in Sub-Saharan Africa. We continue to make good progress on this. If we exclude Nigeria where we do not have a payment license yet, our customer penetration is close to 28%, up from 24% last year.