Airtel Africa Plc Underperforms Analysts Expectations; despite 11.8% Growth in Customer Base


Tuesday, July 29, 2020 /8:00 PM / by Adesola Borokinni, Proshare Research / Header Image Credit: Airtel Africa Plc & EcoGraphics

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Key highlights

  • Customer base grew by +11.8% to 111.5m.
  • Revenue increased by +6.9% to $851m, with constant currency revenue growth of +13.0%.
  • Constant currency revenue growth was recorded across all key business segments, with voice revenue up by +2.2%, data by +35.7%, and mobile money by +26.3%.
  • Underlying EBITDA increased by +7.9% to $375m, with constant currency growth of +14.6%.
  • Reported underlying EBITDA margin was 44.1%, up by 40 bps (61 bps in constant currency).
  • Operating profit increased by +12.9% to $210m, an increase of 21.5% in constant currency.
  • Free cash flow was $96m compared to $62m in the same period last year
  • Earnings per share (EPS) before exceptional items was $1.0 and basic EPS was $1.1.
  • Net debt to underlying EBITDA was 2.2x, compared to 3.0x in June 2019.


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There were expectations that Airtel Africa Plc, a Telco, would be a major growth stock in a period of COVID-19, but the narrative seems different.  In its H1 2020 financial statements, the company noted that "COVID-19 impacted customer usage pattern, particularly during April 2020, however as restriction were lifted, customer usage trends in May 2020 and June 2020 returned to being broadly consistent with pre COVID-19 trends".


The company's H1 2020 result bucked analysts expectations as the underlying assumption that physical restriction of movement of people would translate into higher phone usage by way of increased patronage of voice and data platforms was only midly correct for voice usage but accurate for data patronage. Given prior assumptions analysts had expected that Airtel Africa would witness major growth in both top and bottom line revenue for H1 2020. However, the company's H1 2020 result played up only a slight increase in top line earnings by +6.9%. Airtel's H1 2020 revenue rose from $796m in June 2019 to $851m in June 2020. While it recorded a deep decline in Profit Before Tax which dipped by -33.4%, as PBT declined from $167m in June 2019 to $111m in June 2020 (see Table 1 below).

Table 1: Airtel Nigeria Financial Results Summary


June-20 $m

June-19 $m

Reported Change %





Operating profit




Profit before tax




Profit after tax




Basic EPS ($ cents)




Basic EPS ($ cents)-restated




      Source: Airtel Africa Plc


Running The Nigerian Gauntlet

Airtel Africa's operations in Nigeria recorded a slight increase in revenue in Q1 2020/2021, it's reported currency revenue grew by +8.9% from $313m in the Q1 2019/2020 to $341m in Q1 2020/2021. A chunk of its revenue was derived from voice income, accounting for 57.78% of revenue while data accounted for 35.78% of total revenue. Voice revenue posted in Q1 2020/2021 was $197m while data revenue recorded was $122m.  The rise in data revenue of +30.0% was expected, as the Nigerian economy was in a lockdown from March 2020 to May 2020, thereby, forcing businesses to transition activities to remote operations to ensure continuity.


Airtel in its statement noted that "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%".


Matters Arising-Airtel's Accounting Health Check


It was impossible to ascertain the true state of Airtel Africa Plc's financial position in Nigeria as key activities metrics of its Nigerian operations were not available in the results released to the Nigeria Stock Exchange (NSE). Airtel's statement of financial position as of the Q1 ended June 2020/2021 was absent in the financial results submitted to the NSE. This made it difficult to calculate key financial ratios which would have served as guidance to key investors.


A major issue of concern was the failure of Airtel Africa Plc to abide by the rules of IAS 21 principle which states how an entity may carry on operations where the functional currency of operation differs from the currency of reporting. IAS 21 prescribes that an entity should:

  • Account for foreign currency transactions;
  • Translate financial statements of a foreign operation into the entity's functional currency; and
  • Translate the entity's financial statements into a presentation currency, if different from the entity's financial currency.

IAS 21 permits an entity to present its financial statements in both the functional currency and the currency of reporting. Although,  Airtel noted that "The results for the interim period ended 30th June 2020 are unaudited and in the opinion of management, include all adjustments necessary for the fair presentation of the results of the same period. The financials have been prepared based on International Financial Reporting Standards (IFRS) accounting standards and are consistent accounting policies. All adjustments are of a normal recurring nature. This report should be read in conjunction with consolidated financial statements and related notes for the year ended 31st March 2020".  Airtel Africa  only presented its results, in the US dollar and failed to provide a matching result in its functional currency which was the naira (N) for its local Nigerian operations.


Airtel Africa Plc's accounting governance may, therefore, be  called to question. Airtel failed to meet NSE's standard of presenting three key financial statements which included a statement of profit and loss, a statement of financial position, and the statement of cash flows. Its financial report only contained its statement of profit and loss. The lack of completeness of Airtel's results equally calls to question the NSE's oversight over the process of reporting to investors by listed companies. Airtel's competitor company MTN earlier in the year submitted its Q1 2020 results reporting the results in its currency of operation (the naira) and provided data for investor activity analysis contained in its statement of financial position.


Share Price Movement


Airtel Africa Plc's share price has appreciated by +16.43% year-to-date (YTD) while its competitor MTN Nigeria YTD share price also moved by +12.4% as of July 28th, 2020 (see Charts 1 & 2).


Chart 1: Airtel Africa Plc Share Price  Movement

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Source: NSE, Proshare Research


The sustained rise in share prices of Telcos suggest that investors are optimistic that these companies would do well despite the coronavirus pandemic.



Chart 2: MTN Nigeria Communications Plc Share Price  Movement

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Source: NSE, Proshare Research



Into The Future


The deficiencies of Airtel Africa's result submitted to the NSE may require the stock market regulator to take closer notice of the nature of the results submitted and insist that companies submit periodic results in formats consistent with best global prices which include compliance with both IAS and IFRS standard accounting guidelines.


The differential standards of reporting between companies within the same sector makes industry and competitor analysis a nightmare for investors. Furthermore, Airtel Africa Plc needs to properly address its corporate governance as it failed to meet up with IAS 21 standards as well as NSE guidelines.


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