Earnings Call: Q2 2021

Jul 15, 2021

Good morning, everyone. Welcome to Grumin Earnings Disclosure for the Q2 of 2021. My name is Maureen. I'm the Head of Investor Relations. Thank you for joining us today. Our presentation, financial statements, additional documents are available for download on our Investor Relations website. You can also start posting your questions in the comment box. We will address them at the end of our presentation. In case you are unable to post your questions, please reach out to me through an e mail or text. We will now start our presentation. I would now like to welcome our CEO, Mr. Yasser Asman. Thank you, Noreen, and good morning, everyone. My name is Yasser Asman, CEO of Grameenphone. I thank you all for joining us this morning. Let me start with some of the industry facts this time. As reported by our regulator, till May 2021, the telecommunications industry overall has gained more than 5,000,000 subscribers which is almost a 3% increase from the exit 2020. And 61% of total mobile subscribers in Bangladesh are using now mobile data services as of May 2021. These are reported by our regulator. If we talk about the highlights of the quarter 2, quarter 2, 2021 March Graming phones returned to top line growth Amid the COVID-nineteen pandemic situation. From the last year our total revenue grew by 8.1 percent. Having achieved the 80,000,000 subscriber milestone in quarter 1 this year, we ended the first half of the year with 82,000,000 subscribers, which is more than 10% growth year over year. And in addition to total subscribers, we also have significant growth in 4 gs users, which is 56.5% from last year. However, the challenges have become even more daunting over the past few weeks as the is facing its deadliest wave of COVID-nineteen till date. I'll come back on this later on. This top line growth of 8.1% is driven by the enhanced customer experience and digitalization we have driven during this period. We began 2021 with a stronger start compared to 2020 as we were able to deal with it and manage most of the challenges from COVID-nineteen situation and environment during this period. In the Q1, we achieved a few milestones such as extensive Pension of 4 gs rollout what we did across the country. While we also we acquired 10 4 Megahertz spectrum at the option held by the regulator. In the Q2, we prioritized deploying those spectrum While we continued with network rollout adding more capacity and coverage, which ultimately providing our customers with an enhanced network which is very key and it's our time when we deliver on our customer experience. We have also secured an additional tower co vendor which will further strengthen faster rollout and enhance the strengthening network position. As both the demand for Internet and users for Internet are on going to trend in Bangladesh and for us in Gamifeng. We stayed true to our ambition of being a key contributor to the digitalization of Bangladesh by meeting the demand for data while providing high speed Internet experience for our customers. Despite the challenges from various restrictions due to the pandemic, We could display our ability in market execution, bringing in new products such as bundles for our customers' convenience in several price points and leading to more customer choosing Ramenphone as their preferred telecom conviction service provider. We continue to drive down the trade level forecast at the same time 1 on 1 personalized offer to ensure right products reach to the right customers which enables us to grow and maintain a healthy sub base. Our approach in market execution led to 1,300,000 net addition in subscriber space in this quarter. And in quarter similarly 2,300,000 new 4 gs users in comparison to 1,300,000 net users of subscribers. And digital recharge has shown promising growth of 14.5% year on We had 24% year over year growth in active My GPUs. This is attributed to our continued drive through our own digital channels such as The launch of new and attractive bundles, I've already mentioned vouchers and cashback campaigns from our flagship digital channels, myGP app and as well as in partnership with mobile financial service providers. So altogether, it's like this enhanced customer experience and digitalization. At the same time, our ability to execute in the market in a much agile way, which from the taking learning from the previous quarters during this pandemic helped us to come back as stronger as in top line growth. The Avinphone continued empowering the citizens of Bangladesh by being the preferred choice. At the end of the first half of twenty twenty one, Globalfone is connecting a sub square base of 82,000,000 people as I mentioned, Of whom, 43,700,000 customers access the internet and 23,800,000 are empowered with the power of 4 gs and it's increasing. We have also from 88 July, we have incorporated a national vaccination management portal on our self-service app MyGP, enabling our customer to access the portal right from their signal. So these are the initiatives that are highly acknowledged and valued by the customers. Glarinfone has been continuously accessing for COVID-nineteen development and responding with different direct and indirect contributions from the beginning of the pandemic. In continuation of our COVID-nineteen response, Dakshe Amadeh in 2020. This year jointly with BRAC, we will provide food assistance under Dakshe to the highly impacted population of our society. Families with elderly members, pregnant, Lactating mothers, persons with disabilities, families dependent on women's earning and ultra poor household and those who have not received any assistance from other sources will be prioritized under this initiative. We are welcoming many other corporates to join in this initiative and that is why we say that this is not Chabadash during this time. We are firmly committed to play our role as a leading technology service provider as well as emergency service provider during this period and help our communities overcome these unprecedented challenging times. What was the situation that emerged end of Q2 in relation to COVID-nineteen pandemic? The recent Brave, what we talk about, of COVID-nineteen in Bangladesh has proven to be the deadliest so far. We have caused 1,000,000 reported cases and registered over 16,000 deaths. The authorities have also successfully vaccinated 5,800,000 people during this time. To cut the latest breakout, especially the Delta variant, the border areas of Bangladesh have been on lockdown since May, While stricter lockdown with the help of law enforcement has been in effect from 1st July, which is at the beginning of the quarter 3, We started seeing the trend, the increasing trend of delta infection, it's like towards the end of quarter 2. Telecommunication Services continues to be recognized as the emerging service provider during this lockdown. And since the beginning of the pandemic last year, GP has been operating with a strong business continuity plan, utilizing the best practices and prioritizing the health and safety of our employees, not only our employees, partners, stakeholders and customers. Despite various challenges and risks which we continue to mitigate, our network operations have remained unaffected. There has been various retail closure due to the lockdown which has affected our sales outlets. Our teams have worked nonstop to ensure uninterrupted distribution by utilizing channels which remain open as per the directory authorities capture the customer's steel in the physical space for those who will need it. We have also utilized our power of our data analytics to understand the movement of our customers and our retailers and to keep our customer giving services as far as the returns are concerned. As you understand, the market is mostly prepaid customer base. We'll continue to monitor the situation and pivot when necessary by working together with our stakeholders. I'll come back with a summary. At this point, I will now welcome our CFO, Jens Becker, to take you through our financial performance for the quarter, quarter 2, 2021. Thank you, Asman, and good morning to everybody. Let me start with the main KPIs. Amidst the continued lockdown situation starting from April, Grameen Fund managed to deliver a strong organic financial performance in Q2 with a positive growth momentum in top line along with a healthy profitability. The overall economy is largely impacted, Asman said, by a new wave of COVID-nineteen with average daily new cases reaching to a level of more than 11,000 by the end of June. Despite the volatility of the situation, Grameenphone remained active in the market with strong subscriber acquisition, Investment momentum and customer focused market activities. In summary, grominephone had a 8.5 percent year on year growth in subs and traffic revenue in Q2 'twenty one after minus 2.2% in Q1 20 in Q1 2021 and minus 2.8% in Q4 2020 on a daily basis. In terms of EBITDA, we continued to maintain a healthy margin of 62%. With the continued investment efforts backed by the newly acquired Spectrum at the end of last quarter, GP's CapEx to sales ratio for the quarter stood at 11 point 3%, which was 9.6% in the previous quarter on a rolling 4 quarters average basis. Earnings per share stood at 6.3 bdt with a 17.1% year on year growth in Q2. The year on year growth in EPS is mainly contributed by the mentioned top line growth as well as lower finance cost. Turning to our subscriber numbers. DraminePhone continued its subscriber acquisition drive resulting into 1,300,000 net adds in Q2, including 2,000,000 new data users. Our sub base at the end of the quarter stood at €82,000,000 reflecting a 10.1% growth from last year and 1.6% from previous quarter. According to BTRC published information as of May 21, GP subscription market share increased therefore to 46.5% from last quarter, which was 46.4% in Q1. The number of data users for the quarter stood at 43,700,000, including 23,800,000 4 gs data users, reflecting an increase of 4 gs data users by 2,300,000. Next page please, coming to our revenue development. In quarter 2, Chromium Phone subscription and traffic revenue growth was mainly driven by The growth in bundles means voice and data together and then data alone and the voice revenue alike. The year on year daily subscriber and traffic revenue growth for the quarter was, as mentioned, 8.5% compared to the minus 2.2% in the Q1 this year. While year on year total revenue growth was 8.1% in Q2 due to lower interconnection revenue as a result of reduction in local call termination rates. Getting to the next page, a bit more details. In addition to the continued focus on data and voice, Grameenphone has actively driven bundled products in Q2 in order to provide better customer value along with enhanced experience. By launching attractive and relevant bundled packs along with the continued digital adoption efforts, bundle revenue grew by 6.5 times compared to last year and 2.3 times from last quarter. Excluding bundles, data only subscription and pay as you go revenue increased by 4% from last year. With this substantial growth in bundles, the overall subscription and traffic revenue grew by €2,600,000,000 out of which 97 percent was driven by bundles with the €2,200,000,000 and data only with €300,000,000 Next slide. Chromium through attractive market offers supported by newly acquired spectrum and 4 gs network expansion. As a result, the GP's average megabyte per user grew by 38.6% from last year and 22.5% from last quarter. The overall service ARPU slightly decreased by 1.1% from last year. Now turning to EBITDA, we had a year on year 7.6% growth in EBITDA with a healthy margin of 62%. The growth in EBITDA was mainly driven by higher revenue. OpEx for the quarter stood at €11,200,000,000 with a 9% year on year growth, while the higher OpEx was mainly driven by higher regulatory and sales at market ton cost due to the higher revenue. On the investment side, we kept the investment momentum, continued with €5,200,000,000 CapEx in Q2, focusing mainly towards 4 gs networking coverage expansion along with deployment of newly acquired spectrum. GP rolled out 556 new 4 gs sites and 524 new coverage sites in Q2. At the end of Q2, the total number of 4 gs sites reached 16,140 The 4 gs population coverage, therefore, reached 96.3 percent with an 0.5 percentage point increase from last quarter, which was a 95.8 percent 4 gs POP coverage. Next page. Net profit and earnings per share for the quarter grew by 17.1%. The year on year growth was positively impacted by lower finance cost, means lower foreign exchange loss and interest expenses. The net profit for the quarter taxes margin increased by 1.8 percentage points from last year. Year on year, €1,100,000,000 degrowth that we saw in operating cash flow means EBITDA minus CapEx, was driven by the €2,700,000,000 higher CapEx, which was partly offset by €1,600,000,000 higher EBITDA. Net debt stood at €5,800,000,000 as of Q2 in combination of €12,300,000,000 liability and 6.5 €1,000,000,000 cash balance, excluding the restricted cash. In terms of the contribution to the ex Checker for the first half of this year, that stood at €54,400,000,000 equaling roughly 77% of our total revenue. With this, our as mentioned before, our earnings per share stood at 12.85 PDT. And we are happy to announce a cash interim dividend of 12.5 PDT per share, constituting a payout ratio of 97%. With this, I would like to hand back to Asman for wrapping it up. Thank you, Jens. As you see, we are continuing with the stronger momentum we gained in the beginning of this year. With return to top line growth as a combination of enhanced customer experience, digitalization and our agility to respond to the changing customer demand. We are also managing our operational challenges with all our capabilities in place and playing to our strength in the market execution. As the volatilities related to COVID-nineteen intensify, we will continue operating under our business continuity plan. We will continue to collaborate efforts with our regulators and different government and private entities in our dedication to support our communities in the recovery from this pandemic. I'll stop here. Thank you. Maureen and all connected. Thank you, Asman Way. Up until now, we have not received any questions. So maybe we may wait for a few more minutes, I think we can start. I see some questions starting to come in. The first one from Consilium, what is the impact of bundled offering on the blended pricing for data quarter in this data during this quarter? Jens? Yes. I think as you are aware, bundles like in other markets are picking up Overall, we see continued price pressure, of course, in the market, like we have seen in the previous quarters. But if you see the uptake on data was tremendous on it with a strong growth on the usage, 38% average megabyte per user, ending up with roughly 3.6 gigabyte per user, which was 2.6 gigabyte in the quarter a year ago. Aswanbhai, maybe you can take the second question. What led to substantial uptick in data consumption during quarter 2? This is actually directly related towards the data user growth which have driven over the period and heavily supported by new spectrum and sites rollout. At the same time, strong market execution, the window of opportunity we got with a lesser impact of COVID during this period in Q2. Aswan Pai, I have one sorry, Jens, I have one for you. Current update on Taurico and what will be the impact financial statements. Yes. I think as mentioned before by Asman, we have onboarded a 2nd tower co now. And we have so far in Q1, Q2, 765 had been rolled out by the new tower costs altogether that we have. Jens, I have one more for you. On a price per gigabyte basis, can you help us understand the scenario better? Yes. Well, I think I answered this before. That's on a price per gigabyte, it would be only possible on a standalone basis for the data only. In the bundle scenario, it's difficult to differentiate between it. It's therefore, we can repeat on the price pressure that we see in the markets, very competitive markets continuing. But you see, it's basically offset with very high growth rates on the usage. Yes, continuing with another one. Since the voice RPO is stabilizing, while the data revenue is moving up sharply terms of contribution, should one safely assume stronger revenue growth in coming quarters? I think That's the $1,000,000 question. I think in general, you would be correct if we would not be in this uncertainty that we see with the COVID right now. There will be with the strict lockdown that has been implemented from 1st July. With the strict lockdown means also supported by the military, army deployed to keep people safe in their homes. I would just like to give a reminder that in Bangladesh, we are restricted from giving out forward looking statements as well. Jens, I have a question for you. What percentage of total revenue came from digital channels such as b cash, myGP app in the last quarter? I think this is a very competitive question that we have, which we would not like to disclose, hopefully, there in terms of revenue breakdown. But I might answer you different. If we come, what is important for us is actually world. And I think this, as we have said, has moved up by nearly 15% year on year, now totaling to 26.8% of what we have digital reload in terms of from digital and alternative channels. Aswanda, I have a question for you. Can you please elaborate on the operational restrictions that the lockdown forces upon us? What kind of impact are we indicating here? You see that telecommunication service Sys has been declared as an emergency or essential service in the country. So as far as our network operations concerned, maintenance, optimization rollout, we have not seen As such, any obstacles or restriction at this point of time. Ideally, there should not be any restrictions because as it's been declared an essential service. However, we see that obstacle and restriction in terms of our distribution activities. Many of the shops are not even allowed. So even though if Sometimes we are allowed to go for distribution. We are not able. There are other means of, you know, looking into it. How do you basically for our customers to retail by connecting with our retailers as it is mostly electronic reader system into the market. I think as far as the impact concerned, obviously, while COVID restrictions get stricter, We see, you know, dropping the charges. We see dropping users initially and then start. Thank you, Asun Bhai. We do not have any further I do see another question. Were there any new promotional offers that were introduced during the quarter that drove I can just give you a few thoughts here that this promotional offers depends, it's like many It's not only as such the new pricing or reducing price, it's also bringing in new Price points by understanding our customer need in the changing behavior we see during this pandemic. This is one. The other thing is obviously how granular you are to understand the customer movement and your effort into the new areas we are rolling out our new sites, spectrum and 4 gs. So altogether in a combination of Our enhanced customer experience, digitalization and our ability and agility to basically respond to the customer need Actually, probably strong for the conversions, while customers see the value out of those activities and offers. We're waiting for some more questions. I can take the last one given the more electronic recharges we've given in the lockdown, whether it has impacted. Yes, the Aswanda, I have one more for you. Unlike previous lockdown when we witnessed lots of SIMs getting inactive, Is there a change in customer usage that we are witnessing during the lockdowns in 2021? This we observe every time when there's new restrictions come into picture, it's like that in the prepaid market where lots of users are stopping their small businesses and also in the big enterprises, we see initial drop in terms of customer usage and then we see it starts coming back gradually, Especially in the I have one more, Jens. What is driving the increase in sales and marketing expenses? This is mostly revenue. We have a strong revenue increase. You see out of this, of course, this is due to the commissions that we have is the biggest driver in sales and marketing. Of course, also as we getting back using now the spectrum deployment for extra activities that we have in the market to drive this. Okay. We will wait 2 more minutes for any further questions. Aslanda, I have one last question for you. Is there further headroom available in terms of subscriber addition Before we have to go back to regulator for approval. Yes. Subscriber addition before we go to regulatory approval. We don't see that we are operationally restricted in terms of having subscriber growth in the country and we see that more and more subscribers are preferring coming from the enhancement customer experience, a bit of the direction we are doing and bringing in the value of the customers. Okay. I don't see any new questions. So thank you everyone. Thank you for participating. Have a good day. If you have any questions at all, please feel free to get in touch with me over email or phone. We can also take a few meetings next week. Thank you and advance even more to everyone.