Earnings Call: Q1 2021

Apr 20, 2021

you for joining us today. My name is Mauryl. I'm the Head of Investor Relations for GomainPharm. And I would like to welcome you to our earnings disclosure for the Q1 of 2021. Our presentation, financial statements and additional documents events are available on our Investor Relations website. You can start posting your questions in the comment box. We will address them at the end of our presentation. Work. I would now like to welcome our CEO, Mr. Yasser Asman to start our presentation. Thank you, Noreen, and good morning, everyone. Thank you for joining us this morning. I would like to wish you all a Happy Bengali New Year and Ramadhan Karim. Talking about highlights for the quarter 1. We have actually had a stronger start of the Q1 work in comparison to the Q1 of last year. Q1 of last year was very challenging for Grameenphone as we could not work import our equipments and we have scarcity of numbers resulting in negative net adds. And we were unable to roll out towers as the tower core regime was We had a strongest start in Q1 of 2021 with well managed challenges, welcome everyone to the company's first and foremost, and this quarter also marked several milestones for both Bangladesh and Grameenphone. As the country marked its 50th work with the next year of independence, JP marks its 24 year journey in the country as a partner and enabler to growth and digitalization of the nation. In this early March, the telecom regulator had a spectrum auction where Grameenphone participated and secured 10.4 megahertz spectrum. The auction had a very good outcome, and it contributes positively towards the ultimate good of the country and the people. Having acquired a positive net add of 1,700,000 subscribers in the Q1, GP also marked 80,000,000 subscribers milestone in February this year. On the 50th Independence Day of the country, We also enabled 100% of our Grameenphone towers with power of 4 gs. With a growth of 50.7 work with 21,500,000 4 gs users. We are committed to delivering value for our customers. With the 10.4 newly acquired megahertz welcome Spectrum acquisition. Graminphone now has the largest spectrum holding of 47.4 megahertz in the country. During the quarter, we converted work Almost converted 1510 new sites to 4 gs, resulting in a total of 15,590 towers enabled with 4 gs. With these factors combined, Grameenphone now has the widest 4 gs network in the country, which puts us in the position of further boost customer experience and quality of service. We will continue to contribute to our digitalization of Bangladesh and to meet the growing need for high speed Internet, both in rural and urban areas with the power of 4 gs in We had a strong growth of data users this quarter compared to last year, and we also have seen a 37% growth of 4 gs handset users in our network, therefore, providing us with the opportunity for future growth. We have improved our momentum. However, we have seen increasing volatility. There are many persisting uncertainties and volatilities remaining work Because of the COVID-nineteen pandemic, despite a difficult year 2020, we remain focused on our agenda on delivering our strategic ambitions. With the strong market execution, we drove new acquisitions by adding offers for GP prepaid users, at the same time work raising benefits of existing offers through MyGP, which is our digital channel. We put extra focus on bundles this quarter, gaining significant traction welcome everyone to our revenue. We revamped our overall portfolio with some significant changes such as flattening data proposition work And removing distinction between 3 gs and 4 gs data offers, thus driving convenience for our customers. With cashback campaigns work on MFS channels. We also could increase engagement of our customers with our network. We continue to drive granular trade to e level focus to ensure right product reaches to the right customers, maintaining a healthy sub base growth as well as subsequent revenue growth. And through the lucrative offers, we drove gross set, which means the new acquisition and data through MyGP with exclusive contextual work based offers to add value to our subscribers' life, resulting in over 9,000,000 monthly active users and over 10,000,000 downloads of our apps. Digital adoption was driven through IGP by exclusive download campaigns, resulting in a back to growth momentum of digital recharge. We have seen 35% growth year over year in digital revenues, given that recharge, in fact, in recharge volume. From our B2B verticals, we achieved a strong acquisition of 80,000 subscribers through product innovation and device bundling. Work Business customers continue to put their trust on GP for their dual capability of delivering strongest network across work closely with our customers. We have started providing industry specific solutions to our business customers. We continue to focus on empowering societies through digital inclusion and enablement. At the end of the Q1 2021, work. Grameenphone connecting a subscriber base of 80,700,000 people out of whom 41,700,000 customers access the internet work And 21,500,000 of those customers are empowered with power of 4 gs. We are also driving digital enablement for our businesses and institutions by catering to the concept of touch free economy. COVID has accelerated the need for digitalization. And with industry specific offers, we are bringing solution to our customers, business and digital journey in their life. We are enabling remote working by innovating solutions through smart connectivity bundles, audio conference and cloud solution among others. We have signed agreement and completed biometrics with Bangladesh Technical Education Board for providing education institution We continue our focus on online safety and youth upskill. A government work. Development and Private Coalition has been formed by UNDP last year to create economic opportunities for country's massive youth population to work closely with the company's leadership team. Grameenphone, as a private sector to lead in this coalition, has been supporting UNDP work Bangladesh Investment Development Authority to shape up a multi stake program called Future Nation to drive this ambition. We have signed an MoU with UNDP to take this collaboration further to our exploring possible avenues to contribute in the program materialization. Grameenphone continued to work with Telenor and UNICEF on the child online safety program, Be Smart, Use Heart to create a meaningful and see for digital participation, especially in the context of COVID-nineteen scenario for children, parents and educators. Before I invite CFO or CFO on the financials, let me give some highlights on our COVID-nineteen situation in Bangladesh. Work. Vaccination actually have commenced from February, which over 7,000,000 people vaccinated till date. With the current second wave of COVID-nineteen, current number of cases reported has grown to about 723 work 1,000 while cumulative deaths have crossed 10,000. As a preventive measure, currently, the country is under strict restrictions and lockdown work Declared by the government, which has already been extended by a week. Telecommunications has been declared an emergency service. Therefore, work Planning our operation is allowed, and we are doing so. We have been diligently following our business continuity plan, which comprises of best practices work with key focus on ensuring health and safety of our people and those who work with us as well as delivering value for our customers and shareholders. We will continue to monitor the situation, pivot when necessary, by working together with our stakeholders and together as a team in Grameenphone. With this, I will now welcome our Chief Financial Officer, Jens Becker, to take us through our financial performance for the quarter. Jens? Thank you, Asman, and good morning to everyone. Let me start, as always, with a brief overview before going into the details. In Q1 'twenty one, the Grameenphone continued its solid operational performance in terms of strong subscriber acquisition and investment momentum, work along with the strong EBITDA margin. The overall economy, as we just heard from Asman, is still impacted by COVID-nineteen, work Where average daily new cases has reached a level of around 5,000 by the end of March, while educational institutions remain closed. Despite the volatility of this situation, Grameenphone remained active in the market with a strong gross ad drive along with a continued welcome the expansion of our 4 gs network. In summary, Grameenphone had a minus 2.2% year on year growth In daily, subscription and traffic revenue in Q1 after minus 2.8% in Q4 2020. However, quarter on quarter, daily subscriber and traffic revenue grew by plus 2%. Through our efficient OpEx management, we are able to maintain a strong EBITDA margin of 62.7%. With the continued investment momentum, GP's CapEx to sales, excluding license and lease, ratio for the quarter stood at 9.6 compared to 7.2% in the previous quarter. Earnings per share stood at 6.6 PDT, reflecting a 16.7% year on year degrowth in Q1, mainly contributed by higher finance cost and favorable one off adjustments in Q1 last year. In terms of subscriber development, Grameenphone continued its acquisition drive in the market, resulting into 1,700,000 net adds in Q1 'twenty one, while surpassing the milestone of 80,000,000 Our subscriber base at the end of the quarter stood at 80,700,000 with a 2.2% growth from previous quarter And a 7.2% growth year on year. With this, according to BTRC published information as of February 21, GP subscription market share stood at 46.4%. The 4 gs population coverage reached work 95.8%, which is a 4.7 percentage points increase from last quarter, which was at 91.1 work with you on the 2nd 4 gs POP coverage. Now turning to the revenue development. The overall revenue development was impacted by the economic uncertainty, along with the reduction in local call termination rate effective from mid July 2020. Year on year daily subscription and traffic revenue growth for the quarter stood at minus 2.2% And minus 3.7 percent for total revenue. Here, the SEK1.1 billion or minus 3.2 Decrease in subscription and traffic revenue was mainly driven by a lower voice revenue of around €1,300,000,000 BDT. Next page. Our data uses for the quarter stood at 41,700,000 including 21,500,000 4 gs data user, which means that our number 4 gs data users increased by 1,700,000 in Q1 'twenty one. The growth in 4 gs data users was positively impacted by the accelerated drive of the expansion of our 4 gs network capacity along with the continued focus on 4 gs conversion. Year on year data revenue, D grew by minus 4.4% in Q1 'twenty one, driven by a 6.8% decrease in data ARPU, work As a result, year on year revenue from bundles work grew by €700,000,000 or more than 150% year on year. Besides considering the data revenue allocation from bundled packs year on year, GP's Data revenue growth was minus 1.1 percent or on a daily basis, basically remained flat. Work Next page. GP continued providing its customers better value through attractive market offers, including segmented campaigns, new packs to remove 3 gs, 4 gs barriers, celebration packs for our 50 years Bangladesh of independence and 80,000,000 work In addition, GP continued its focus on portfolio integration like we heard before from Asman with different MFS channels. As a result, GP's average megabyte per user grew by 32.4%. The service ARPU growth was mainly impacted by lower service average minutes work per user, along with a dilution in service average price per minute. Now turning to the cost side. Our efficient OpEx management led to a year on year 4.2% OpEx degrowth against the 3.7 5% year on year mainly due to the lower revenue, increased direct costs, partly offset by the mentioned lower OpEx. With this, EBITDA margin maintained strong at 62.7%. Next slide, the investment side. So GP's investment momentum continued with CHF3,600,000,000 CapEx, excluding the license and lease in this quarter, work focusing mainly towards accelerated 4 gs network expansion. We rolled out 1510 new 4 gs sites work closely with the progress we made in this quarter, resulting into 100 percent 4 gs towers. At the end of Q1, the number of 4 gs sites reached 15,590. Next page. The year on year 16.7 percent degrowth in net profit was mainly driven by higher financing work of SEK0.7 billion due to lower foreign exchange gain and higher tax expenses due to favorable one off adjustments in last year. Net profit for the quarter stood at €8,900,000,000 with a 25.6% margin. On a reported basis, the net profit after taxes margin decreased by 4 percentage points from last year. Work Next, the year on year DKK4.3 billion degrowth in operating cash flow means EBITDA minus CapEx was mainly contributed by a SEK3.2 billion higher CapEx and the SEK1 1,000,000,000 lower EBITDA. Net debt stood at minus €5,500,000,000 The €6,000,000,000 increase in net debt from last quarter was mainly contributed by work with the SEK 1,200,000,000 lower liability and SEK 4,800,000,000 higher cash balance, excluding the restricted cash. Now finishing off my part of the presentation with an overview of our contribution to the National Exchequer, which stood at €27,300,000,000 in Q1, work Equaling around 78.5 percent of our revenue. And with this, I would like to hand back to Asman. Thank you, Jens. And to recap, I must say we have had a strong momentum in the beginning of work on the next slide. 2021 as a combination of well managed operational challenges with all our capabilities in place and playing to our strengths in the market execution. The volatilities related to COVID-nineteen are currently on an increasing trend. And with our strong business continuity plan and collaborative approach efforts work with our stakeholders. We are dedicated to supporting our communities in the recovery of the pandemic, while we maintain health and safety of our employees and our talented let Partners at the same time drive similar awareness for our customers. Going forward, we'll continue to build on our leadership in technology and digital know how work Supported by innovation, at the same time increasing numbers of subscribers, 4 gs users and data users, all of which will thank you all. Stay safe and healthy. I hand back to Nouriel for Q and A session. Thank you, Asminbi. We have already started receiving some questions. Let us start with the first one. Okay. Why NSF side in this quarter? As you might recall, in Q1 last year, we had A deposit of BDT SEK 10,000,000,000 to BTRC that was made pursuant to the order of the honorable appellate division of the Supreme Court Of Bangladesh referring to the dispute on the BTRC audit. So it's a last year's effect. Okay. We have a lengthy set of questions from IDLC. Let's start 1 by 1. How do you assess 3.5% year over year decline in data revenue in quarter 1. Yes. GP's investment and data acquisition was adversely impacted from mid-twenty 19 to mid-twenty 20, which had a continued negative impact. So data revenue, including allocation from bundles and number of day adjusted remained flat. What is your outlook about data price competition in the industry and where do you see the inflection point? Unfortunately, according to the rules of the Bangladesh Securities and Exchange Commission. We cannot give out any forward looking statements or any outlook. So we have to refrain from answering this. Work Yes. But let me answer it at least backwards, honestly. If you see the data development, I think you see you recognize that the Average data price came down significantly year on year on this, which is reflected. So also means it's an extremely competitive market on the data us. We will wait a few more minutes to see if something else comes up. Lance, I have one more question for you. Can you elaborate on the local call termination rate? How does it affect the total revenue? Yes. As you can see from our financials comparable to the subs and traffic revenue development versus Total revenue, that's a negative impact from that from the S and P regulations last year of around €0,300,000,000 this was covered in our presentation. Let me then answer the I I think there's a question on what was it, elasticity, right? Yes. Can you elaborate? Elasticity? Work Yes. I was surprised elasticity on the data front. On the data front was the question that I saw here. As I mentioned You saw an uptake of the average usage by roughly 32%, ending up With the 3 gigabyte around 3b2.945, I believe, on this, which was And Noreen, on the 4 gs question, we have at this point of time 21,500,000 4 gs users in our network. Work And 4 gs subbase consists of 29% of total GPs subbase in Q1 2021. Ask, may I request you to answer one more question? Can you elaborate on the strategy? Yes. We remain actually focused on being a leading technology service provider to help the nation to unleash its potential, especially work The youth of Bangladesh. While having that promise, we have a couple of areas of the value drivers strategically prioritized To continue creating value for our shareholders and as well as in our customers' life. And these are four things we are focusing on. It's the Tata experience, Tata network experience, growth, modernization of our organization and the way we work, Our commercial technology and overall industry functions. And the final one is, how do you constructively work with let regulators and in the business environment for the future of Bangladesh while we are bringing in new technologies and looking forward to 5 gs in These four areas remain as our strategic priorities to drive growth and efficiency. Ask, how do you overcome COVID-nineteen? And again, we can't give our future outlook, but a little bit of flavor on that. At this point of time, we are having a strong business continuity plan so that we keep our customer connected and bring in new product and services Solutions so that being at home, our customers can run their businesses. And as an individual, if you're a student, you can continue your education. And to overcome from this COVID, we need to take the maximum learning out of this situation. And there have been many new way of work coming out work And eventually, we need to bring those into our practice. We are building a resilient data network. As we have mentioned that, we have Acquired new Spectrum 10.4 Megahertz. At the same time, in March, we have rolled out 4 gs all over Bangladesh. All our towers are now work Converted to 4 gs, at the same time, the tower regime as tower rollout has started rolling out, our data network will be much stronger. And that is how we will help the country and the company to overcome from this COVID situation because we do believe that the future will be riding on digital connectivity and digital solutions. On base from 3 gs to 4 gs. This is also, to some extent, related to what we have just mentioned that now the customers can access 4 gs to anywhere of the from anywhere in the country. So it is 100% BTS. The towers are now converted to 4 gs. And then the next thing is bringing in 4 gs device in our customer's hand. It is a responsibility for the device manufacturers, work importers, government and regulators together. And we as a body into the ecosystem, we are working with all of them so that coming devices are coming at Affordable prices and all 4 gs because the country is ready to provide 4 gs services all over the country. So there is no point of bringing in new 3 gs device. And that is how we are working on with the ecosystem players. And to add on, we do actually play a critical role from the forefront of bringing in affordable 4 gs devices. Even right before the launching of 4 gs in Bangladesh 2018, we have brought in 4 gs devices So that we pre owned the conversion and we have continued that journey through innovation and affordable price. Nouriel? Thank you, Ashinda. Yans, I have a question for you. Mobility seems to be recovering as witnessed by the subscriber growth. Why is usage down for voice then? No, you see that at least for Q1, the economy and mobility are in a recovery trend. This What we said, if we see the growth on a quarter on quarter basis, which is 2%, so it's recovering, but it's not fully recovered. And please reflect that also the educational institutions are still closed. Up until now, we do not see any further questions. We'll wait a few more minutes. Yes. Should I there's a question on revenue cannibalization. Is that correct? Yes, how do you see the risk of voice revenue cannibalization from migration to data? Because obviously there There's a risk. I think this is what has been seen in all of the markets, right? And we see also the OTT getting stronger. But nevertheless, Also you see from our results you have on voice is still extremely strong. It's the overwhelming part of our revenue. Okay. There has not been any new questions in the past 12, 3 minutes now. So I think we can close this here. Thank you everyone. In case you do have any questions, please get in touch with me. We'll try to get you a report within today. Additionally, if you have any requests for meetings with management, please also get in touch with me. We will be available. Thank you. Stay safe.