November 06, 2019 /02:18PM / By Cordros Research/ Header Image Credit: DIGEST AFRICA
The management of Airtel
Africa Plc (AIRTELAFRI) hosted a group investor session in Lagos at the end
of last week to discuss H1-20 results and the outlook for the business. These
are some of the key issues discussed:
- Accelerating top line growth and
lower net debt: Revenue grew 12.6% y/y in Q2, from 10.2% y/y in Q1,
with sequential improvements across all regions. Management stated that
according to the NCC: In September, on a m/m basis, Airtel Nigeria grew
data subscribers by c.445k, nearest competitor c.74k (MTNN). Net debt was
down 50.4% y/y to USD3.2bn and with leverage (Net debt to EBITDA: 2.3x)
down to within the guidance range of 2.0x to 2.5x, the company declared an
interim dividend of USD0.03/share.
- On recent USSD issue between banks and
The charges have always existed and are not new. Some operators charge
customers, some charge the banks, depending on what USSD service is used.
The regulator (NCC) has asked telcos to suspend charges until a fair
solution is found. Current charges are regulated by the NCC and are
between NGN1.89 and NGN4.00 per session.
- On Average Revenue Per User (ARPU) for
c. USD4.00; AIRTEL: c. USD2.40. MTN has more premium customers.
As Airtel's 4G dominance increases, ARPU will grow. Focus is on
4G expansion as 4G customer ARPU is substantially higher than 2G and 3G
customer ARPU on data.
- Delay in PSB license: Airtel keen to launch the mobile money
service in Nigeria. Group has put in the application, and fulfilled the
requested conditions; just waiting for the regulator to review and provide
approval in principle for both payment service bank and super-agent
licenses. The group believes it will be awarded the license in the next
couple of months; worst case, scenario early next year.
- On playing catchup in the Nigerian
mobile money space: Vis-a-vis PSB license, indigenous operators,
Glo and 9mobile, have only been issued "approval-in principle".
They are not able to begin mobile money operations yet. Also, they are
smaller operators who do not have the scale of their bigger multinational
counterparts. Airtel's current success in Mobile Money has not
been about beginning operations first. It has been about finding the right
strategy and execution. For 7 years, Airtel did not have mobile money in
Zambia (MTN and another player controlled c.99.0% of the market). Now
Airtel is the biggest player in that space in Zambia. Airtel played
catchup in 4G as well, as the company was the last to begin the 4G
rollout. Today, the company has the largest 4G network in Nigeria. Nigeria
is an untapped market for mobile money, with significant revenue
potential, so there are opportunities for everyone.
- Democratic Republic of Congo (DRC) is a highly dollarised economy, and as such
there is no currency risk. All transactions in local currency are done at
prevailing exchange rate each day.
- Chad, Niger, Gabon, Congo-Brazzaville use CFA Franc which is pegged to the
Euro; marginal movement, marginal impact.
- Major currency risk exists in East Africa & Nigeria, and as such the
company makes efforts towards balancing FCY and LCY debt.
- Excluding Nigeria, average currency devaluation over the last 3-5 years across
countries of operation has been c.3%.
- Investing in Airtel Africa is great opportunity to hedge as it offers exposure
to different countries
- On average, in the medium term, expected devaluation - 2.5% - 3.0%
- Funding the next 5 years: Continuous EBITDA expansion gives advantages
of adjusted leverage. There is a window available to expand external financing;
Target Net Debt/EBITDA - 2.0x - 2.5x (Currently: 2.3x; ex- Lease
Obligations:1.3x.) Enough headroom to cater to the needs if any exigency
- Opportunities for further monetisation from sale of Towers, monetising 35 km of
Fibre Network, setting up revenue share for Data Centres across 14 countries,
which the company has just started upgrading.
- There is enough headroom for further investment whenever required.
- Airtel Money does not have a heavy capex requirement, unlike telecoms. The
company can build more capacity at lower incremental cost, and as such, the
capex requirement will not go up substantially.
- Long term Capex intensity at c15.0-16.0% (currently: c.18.0%).
- Facebook Libra: No significant risk. Airtel Money will be parallel
supply side for the poor outside of banking system. Airtel Money will serve as
a bank for the unbanked + a fintech company.
- A lot of debt is short term debt taken at local operating company level - LCY
(USD235 million); FCY (USD562 million).
- Finance lease obligations (USD1.2bn) are payable over a 7-10-year period.
- FCY debt at Holdco level is USD2.7 billion which comprises:
- CHF350m due in March
- EUR750m bond due in 2021
- USD505m bond due in 2023
- USD1bn bond due in 2024
- Immediate requirement is Mar 2020 loan. The group has USD1.5 billion cash in
the bank - which is sufficient to pay upcoming obligation. There are also
enough facilities in hand to take up as and when required to do so for the rest
of the debt.
- Weighted Average Cost of Debt - 4.5%
- To reduce effect of devaluations, the group has a hedging policy - anything due
in 6months, 50% - 70% of the value is hedged; anything due after 6 months - 1
year, 25%-35% of the value is hedged, as at the end of day that is also
- Nigeria operating company is debt free. Only lease obligation.
- Overall debt structure will not be significantly higher in medium term except
for a black swan event.
- AIRTELAFRICA Declares $228m PAT in Q2 2020 Result, (SP:N308k)
- Airtel Africa and Finablr Announce a Global Partnership to
Africa Announces Partnership With Ecobank Group
- Airtel Africa Announces Partnership with Mastercard in Africa
- Airtel Africa Notifies Of Dealing In Shares By A Person Discharging
- Airtel Africa Included In FTSE 250 Index Effective Sept 23, 2019
- Financial Highlights Q1 2020: Airtel Africa Plc Customer Base Grew
By 9.3% to 99.7m
- Airtel Africa Plc Announces Total Voting Rights As At July 31, 2019
- Airtel Africa Lists on the NSE; Stockbrokers Call for Transparency
And Competitive Dividend Payments
- NSE Admits Airtel Africa Plc to its Main Board
- Airtel Africa To List On The NSE On Tuesday July 09, 2019
- Airtel Africa Plc Listing On NSE Postponed
- Airtel Africa Plc Set to List on Mainboard Of NSE
- FAQs On The Airtel Africa Plc Listing On The Nigerian Stock Exchange
- Airtel Africa to Announce Offer Price and Allocate Ordinary Shares
on 28th June 2019