Airtel Africa Q2 revenue grows 6.9% to $851M amidst COVID-19 concerns

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Airtel Africa, the subsidiary of Bharti Airtel, reported revenue grew by 6.9%, with constant currency growth of 13.0%. The constant currency growth of 13.0% was partially offset by currency devaluation, mainly in Nigeria (6.9%), Zambia (28.3%) and Kenya (4.4%).

The revenue growth was largely driven by the growth of our customer base, up by 11.8% to 111.5 million and ARPU growth of 1.6% in constant currency. Revenue growth was recorded across all the regions: Nigeria up 17.1%, East Africa up 17.5% and Francophone Africa up 2.2%.

Notably, revenue growth was broad-based across all its key segments: voice up 2.2%, data up 35.7% and mobile money up 26.3% in constant currency terms.

The telecom giant also recorded growth in its customer base by 11.8% to 111.5 million.

Airtel Africa Q2 revenue grows 6.9% to $851M amidst COVID-19 concerns - Brand Spur
(1) In July 2019, after the announcement of Initial Public Offering (IPO), the company issued 676,406,927 new shares. EPS has been restated considering all the shares as of 30 June 2020 had been issued on 1 April 2019 for like comparison. (2) PBT and PAT decline is largely due to one-off items incurred in the same period in the prior year. Refer to page 4 for explanations of GAAP measures movements. (3) The difference between reported currency and constant currency growth rates is on account of currency movements, with reference to the US dollar rate.

Operating profit

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Reported operating profit amounted to $210m, up 12.9% and 21.5% in constant currency.

Net finance costs

Net finance costs increased by $17m, driven by higher other finance costs which more than offset reduced interest costs of $5.5m as a result of lower debt.

The increase in other finance costs was primarily driven by the higher impact of devaluation on foreign exchange denominated liabilities and borrowings largely as a result of devaluation in Zambian kwacha, Madagascar Ariary and Seychelles Rupee.

Taxation

Total tax charge was $54m as compared to $35m in the same period last year. This was due to higher operating profit and withholding tax on dividends declared. Q1 2020 also benefited from a deferred tax credit of $13.8m in DRC as compared to $6.7m in Q1 2021 in Tanzania.

Profit after tax

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Profit after tax was $57m, down by 56.9%, largely as a result of a one-off gain of $72m related to the expired indemnity to certain pre-IPO investors in the same period last year, higher finance costs and tax.

Excluding one-off benefits in the previous quarter, profit after tax for the quarter reduced by $13m mainly due to higher derivative and exchange loss of $19.4m in Q1 2021.

Basic EPS

Basic EPS was down by 72.8% to $1.1 cents, due to an increase in shares issued. If all the shares as of 30 June 2020 had been issued on 1 April 2019, the restated basic EPS for June 2019 would have been $3.3 cents. Restated EPS reduced as a result of higher finance costs and tax.

Free cash flow

Free cash flow was $96m, up by 53.5% largely due to the higher underlying EBITDA rising by $27m, reduced interest payments falling by $8m resulting from lower debt and lower CAPEX reduced by $33m partially offset by an increase in cash tax.

The Nigeria Market

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In Nigeria, revenue in constant currency increased by 17.1%, with reported revenue growth of 8.9% as a result of the Nigerian naira devaluation. The slowdown in revenue growth during the quarter was driven by the restriction on movements imposed as a result of the Covid-19 pandemic, which impacted customer usage, particularly in voice.

Voice revenue increased 6.9% to $197m, which was supported by a 13.5% increase in the customer base and was partially offset by a 4.6% drop in voice ARPU. The ARPU decline was a result of a change in customer usage mix due to the Covid-19 pandemic. The customer base growth of 13.5% was driven by the expansion of our distribution network supported by the accelerated rollout of our network infrastructure.

Data revenue growth of 40% was supported by 18.5% growth in data customers and data ARPU growth of 20.7%. Data customer penetration in our customer base was 41%, up by 2 ppts from the previous period.

The accelerated rollout of 4G network supported customer base growth (with 70% of total sites now being 4G) and affordable data bundle offerings. The total data usage on our network almost doubled versus the previous period.

Additionally, 4G data usage contributed 58% to the total data usage. Data usage per customer reached 2.7GB, up by 69.2% and the data revenue accounted for 35.7% of total revenue, up 5.8%.

Underlying EBITDA grew by 17.1%, with reported currency growth of 9.0% and underlying EBITDA margin being flat at 53.3% level, mainly as a result of the higher provision for enterprise customer bad debts due to lower collection on account of the slowdown in the economy due to Covid-19.

Capital expenditure amounted to $30m, reducing from $53m as a result of lockdown in April and May 2020.

Operating free cash flow was $152m, up by 48.2%, largely as a result of double-digit underlying EBITDA growth and lower capital expenditure.

Raghunath Mandava, chief executive officer, on the trading update:

“During the last quarter, our business was impacted by the Covid-19 pandemic, as restrictions on movements of people and ways of socialising were introduced to contain the spread of infection.

In these unprecedented times, we have worked with governments, regulators, partners, and suppliers to keep customers and businesses connected as well as supporting the economies and communities.

Airtel TV

In May 2020, Airtel TV launched in Tanzania and it is now live in four countries with more than a million registered users across Nigeria, Uganda, Zambia and Tanzania.

In April, the company launched TVOD (Transactional Video-On-Demand) services for our customers in Nigeria, and with this service, customers can now enjoy the latest Nollywood blockbusters on the Airtel TV app.

Partnership with WorldRemit

In July 2020, Airtel Africa scaled up its operations with WorldRemit, the global digital money transfer service that operates in over 50 send countries to over 150 receive countries.

This partnership will enable customers from across the globe to receive money into Airtel Money wallets. The diaspora living in more than 50 countries around the world can quickly and easily send money transfers at any time via WorldRemit to Airtel Money customers back home.

“We focussed on expanding and maintaining our network to ensure it could cope with increasing demand, we kept our distribution up and running by increasing the penetration of digital recharges and stock levels, and we expanded our home broadband solutions to ensure customers could work and access entertainment remotely”, added Mandava

He reiterated that the “Covid-19 impacted customer usage pattern, particularly during the month of April, however, as some of these restrictions started to be lifted, customer usage trends in May and June returned to being broadly consistent with pre-COVID-19 trends.”

The Group’s performance generally reflected these trends, with revenue growth accelerating in May, and we ended the quarter with 13% revenue growth and 61 bps of EBITDA margin expansion in constant currency.

The business showed its resilience even during these unprecedented circumstances with all key business segments – voice, data and mobile money, and all regions – Nigeria, East Africa and Francophone Africa contributing to growth.

During the quarter we also increased our support of the communities where we operate by providing financial support towards essential workers, free data for educational purposes and we worked together with governments to temporarily waive fees on certain mobile money transactions.

We also created an exciting partnership with UNICEF to provide children with access to remote learning and enable access to cash assistance for their families via mobile cash transfers.

The outlook remains uncertain, particularly regarding a so-called potential second wave of infections and the actions governments will decide to take in that event.

However, these results are further evidence of the growth opportunities our markets offer and the effectiveness of our strategy to focus on winning customers, investing in our network and expanding our voice, data and mobile money businesses.”

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