Earnings Call: Q4 2020

Jan 28, 2021

Good morning, everyone. My name is Narayan. I'm the Head of Investor Relations for Bemidjan, and I would like to welcome you to our earnings disclosure for the Q4 of 2020. A small note before we begin, our presentation, financial statements and additional documents are available on our Investor Relations website. You can start posting your questions on the comment box. We will address them at the end of our presentation. I would now like to welcome our CEO, Mr. Yasser Rahman to start our presentation. Thank you, Nori, and good morning, everyone. Thank you for joining us today. My name is Yassir Asman, Chief Executive Officer of Grumman. Before we deep dive into our performance of the quarter, I would like to take you through a recap of of year 2020. And that's COVID, the impact of COVID-nineteen, which was omnipresent in world economy, and Bangladesh was not an exception. In early March 2020, Baladesh reported the first case of COVID. Then onwards, we have seen the numbers of of positive cases and debts started rising as it is all over the world. And as a precautionary measure, the government declared general holidays from of the March, which were lifted at the end of May with lockdown and restrictions on Moonwind. The livelihood adversely impacted. The lockdown initially led to operational challenges for us as the distribution value chain retailers and network operations were interrupted. However, It was good that government has declared telecommunication service quickly as an essential service and which We had a strong business continuity plan in place from the beginning of the year, I would say from the beginning of March, while we started facing COVID to ensure continuation of our operational level. And during this period, our teams have Also worked closely with central and local authorities and stakeholders to overcome the challenges by being very agile while they were on the ground and finding out new innovative ways to tackle the issues we were facing at that point of time. We also implemented some of the best practices in our BCP, which helped us navigate through this challenging pandemic situation in identifying and mitigating the risk we have seen. In addition to COVID, we have also experienced that The increase in supplementary duty in June making telecom services more expensive to avail for our customers. Regulatory also imposed S and P directives on us in July, which we complied with under protest as we continue to work together with them to establish a framework. Together with the regulatory bodies, we are now working on strengthening the processes in this regard. We have seen progress as far as the new tower rollout concerns. We reached a service level agreement with our tower company partner of e.co after securing approval from the regulator. And that's in progress, which is much immediate at this point of time to mitigate the gap in our network and bring in better customer experience in coming days. After securing non objection certificates from our regulator, we also continued our planned investment in the second half of the year. And despite unconventional challenges. A solid operational performance by our dedicated teams has led us a strong foundation for GP as we are entering into 2021. Moving on, we have experienced lower than We have expected economic recovery from the pandemic in the quarter 4, though we were experiencing better recovery earlier in the Q3. Of the business by launching various campaigns and implementing our product portfolio, taking learning from the subscribers, changing demand due to the pandemic, of attractive contractual offers for customers based on their need we have observed during this period. To ensure quality data subscriber for 2021 when we enter when we were of 2018. We focused mainly on the customer management, how can we reduce the churn and also new data subscriber acquisition through various campaigns. Our focus in digital distribution also remained very strong. We teamed up with our mobile financial services partners like Vikarash and Agod by launching various cash incentive based and customer engagement driven campaigns. We will also launch exclusive voice packs for our self-service app, Also data packs for our self-service at myGP as well as through Mobile Cyber Financial Services. While we were revamping overall portfolio for our Flexiplan channel, which is also one of our very key digital distribution platform. To innovate, we focus on service bundling. We connect our customers to what matters most to them. Service funding with popular apps such as like G5 and video various video streaming services were launched during this period. And finally, drive on 4 gs conversion this quarter led us to 19,800,000 4 gs users out of our total 41,300,000 data of users in our network at the end of the year. And that's a major improvement in data subscriber phone and an excellent entry to 2021. I'd like to move on to give you some update on our regulatory environment. As discussed last quarter, we have signed the service level agreement with e.co following regulatory approval, which will first check the acquisition of new towers. This partnership extends our commitment to ensure quality access of data and voice across the country with an increased number of towers. And in regards to BTRC audit, BTRC and post telecommunication division proposed to form a 7 member committee to deal with the recovery of ETRC audit claim and requested GP to nominate 2 person into this committee. We responded asking for clarification with regards to terms of reference and also the decision process of the committee. GPM Vitor C now is in good dialogue of this matter. Based on GPs' request, a meeting took place on 13th January 2021, chaired by the BTRC Chairman, and we'll continue working with our regulator. Moving on, COVID-nineteen, a little bit of situation update at this point of time from my side. Until that Bangladesh has recorded over 530,000 cases of COVID positive with the number of deaths crossing 8,000. It has impacted our in many sectors, our educational sector, which has been closed since March, is slowly gearing up to reopen as per the instruction of the authorities. Several government mandated precautions are being put in place to ensure proper protocols are followed by the education Prioritizing the health and safety, unlike many other parts of the world, the detection rate of Bangladesh has been slowly declining with no further lockdowns we have observed after May. However, several uncertainties remain as the pandemic and related risks are still not over. So, at this period of pandemic, GPS collaborated with several authorities and partners in providing emergency responses to COVID-nineteen. Likewise, we provided PPE and test kits to 8 designated COVID facilities and medical frontliners as well as provide an emergency food assistance to 100,000 families in dire need. Due to the various restrictions, many GP customers were unable to recharge their balance, And we provided 10 free minutes to 1 pro prepaid customers to ensure their connectivity with their loved ones. Faced by the pandemic, Garmin phone has Adopted to several contingency and new ways of work, prioritizing the health and safety of our employees, partners and customers, there were no disruption to our sales and subscription channels As an outcome overcome by the force, yet it was very difficult to ensure our services in the distribution and retail front while we were into lockdown in the during March to May period. We continued empowering the society With the largest network footprint in the country, Glaming Phone is privileged to be able to empower 79,000,000 customers with network connectivity, enabling 41,000,000 customers with access to Internet, out of which 19,800,000 customers enjoy the benefits of 4 gs, which is 65.6 percent up from previous year in terms of R4 gs users. Throughout 2020, Ramyfone has paid BDT 98,200,000,000 We'll also continue our efforts and collaborate with authorities and partners in helping our communities recover from the pandemic. Now I would like To take you through our financial performance in details, I would now also like to invite our CFO, Jens Becker, to take us through the financial performance. Of 2019. Thank you, Aslan, and good morning to everybody and the call. So let me start with an overview of our key KPIs. In quarter 4 2020, Grameenphone continued its solid operational performance in terms of strong subscriber acquisition and enhanced investment momentum amidst the economic uncertainty. The overall economy is still impacted by COVID-nineteen with an average daily new cases of around 2,000 level during October November, while educational institutions remained closed. The economic activities were further influenced by bad weather and early winter. Despite the of this situation. Renewable remained active in the market with 372,000 active recharge outlets on a daily basis Means coming back to a pre COVID level along with the continued expansion of our 4 gs network. In summary, Grameenphone had minus 2.8% year on year growth in subs and traffic revenue in Q4 after Sales ratio for the quarter stood at 11.4% after 9% in Q3 and 7.5% in Q2. As a result, year to date basis, CapEx to sales ratio stood at 7.2%. Earnings per share grew by 12.3 percent year on year to 7.65 PDT in Q4, benefiting from lower finance costs and tax expenses due to one off dispute settlement impacts. Turning to the next page. Graminefone continued its Subscriber base expansion was 1,400,000 net adds in Q4, backed by a strong acquisition drive in the market. Therefore, the sub base at the end of the quarter stood at €79,000,000 posting a 1.9% growth from previous quarter. According to BTRC public information, GP subscription market share stood at 46.5 percent with an 0.1 percentage improvement. Our 4 gs population coverage increased by 7.8 percentage points compared to Q3, reaching 91.1 percent after 83.3% 4 gs PoP coverage in Q3. Next slide, turn to the revenue. The overall revenue development has been impacted and a minus 3.7 percent for total revenue. The €900,000,000 decrease in substance traffic revenue was mainly driven by shortfall in voice revenue, contributing minus €1,300,000,000 partly offset by the growth in data revenue was a positive €400,000,000 Our total revenue growth was additionally impacted by the reduction in both the local and international call termination rates. Continue on the next slide. The growth in data revenue of 2018. Continued with the plus 5.1 percent year over year, a 9% increase in data ARPU and 1.7% increase in data user. Data users for the quarter stood at 41,300,000, including 19,800,000 4 gs data users, which means that in Q4, Chromium Foods 4 gs data users increased by 2,000,000. The growth of our 4 gs data users was positively impacted by an accelerated drive on the expansion of our 4 gs network of capacity along with a continued focus on 4 gs conversion. Turning to the next. GP continued providing its customer better value through attractive market offers, including segmented campaigns and bonus on 4 gs Data Packs. In addition, GP focused on portfolio integration with different MFS channels, as Asman has mentioned before, in Q4. As a result, GP's average megabyte per user grew by 51.4% to around 2.9 gigabyte per user leading to a 2.9% growth in data ARPU. The negative service ARPU growth was mainly impacted by a lower contribution from voice and interconnection, which could be only partly offset by the higher contribution from data. Turning to the OpEx side. On OpEx, we were able to reduce cost by 5.6% year on year against the 3.7% degrowth in total revenue. In absolute of terms. OpEx for the quarter stood at €10,500,000,000 BDT, while the OpEx reduction in Q4 was mainly driven by lower acquisition costs, commissions, market spend and an increased operational efficiency. EBITDA grew by of 3.9% year on year, mainly due to the lower revenue, partly offset by the good lower OpEx, Resulting in a stable EBITDA margin of 63.4%. Next page, GP's investment momentum continued with €4,000,000,000 CapEx in Q4, focusing mainly towards accelerated 4 gs network expansion. On a stand alone basis, as mentioned before, this reflects a CapEx to sales ratio for the quarter of 11.4% after 9% in Q3. We've rolled out 2,659 new 4 gs sites in Q4. And at the end of Q4, The number of 4 gs sites therefore reached 14,080 and of the range to 16,547. On the next slide, our net profit grew by 12 point of 20% year on year, positively impacted by one off adjustments in our finance costs and tax expenses due to the resolution of pending issues. In absolute terms, net profit of €1,300,000,000 was a 29.7% margin. On a reported basis, The NPAT margin improved by 4.2 percentage points from last year and 4.7 percentage points from previous quarter. GP's full year EPS stood at year on year growth along with a profit margin of 26.6%. Next page. On the operating cash flow, means EBITDA minus CapEx, They grew by €900,000,000 on year, mainly attributed to the €900,000,000 lower EBITDA that we have. Net debt stood at €500,000,000 The €4,500,000,000 decrease in net debt from last quarter was mainly driven by €7,600,000,000 for liability and €3,100,000,000 lower cash balance, excluding the restricted cash. Just a snapshot on next slide on our contribution to the National Exchequer, which stood at of €98,000,000,000 BDT for the full year, posting an increase compared to last year. And finally, on next slide, in terms of dividends, the Board of Directors has recommended a cash dividend of 20 7.5 bbt per share of 99.86 percent of profit. Of 2017. With this was the financial overview. We'd like to ask and welcome back Asman to conclude our session today. Thank you, Jens. And as a recap, I'd like to say that we have proven to of our experience and to continue bringing innovation to our customers as we enter into 2021. However, the COVID-nineteen pandemic is far from over. We are full. We will be ready of uncertainties that remain. While we aid our customers, Digital and technical expertise, we will continue to build on experience we provide to our customers and strengthening our digital distribution as key value drivers for our future growth. Thank you, everyone. I'll now hand back to Nordi for our Q and A session. Thank you, Asunde. So I see a question from on data revenue growth at 5% year over year and slightly down quarter over quarter. Any major reason for data revenue growth trending down compared to previous quarters? I see the answer. We, of course, in the data is still on a growth path. As you've seen, a little bit lower year on year than we have seen. Nevertheless, we also see a fierce competition going on into the When there are no further questions, I believe some of our viewers are having trouble logging in today. So I'm really sorry about this. If you do have questions, please get in touch with me. We'll get back to you. Maybe we give it a minute or more to see if there are any more questions. Okay. We have one more. Can you give details regarding the agreement with the tower companies? Aswunghay, I believe you can take this. It's a long SLA and we have worked with our regulators over the last Almost 2 years during this talk to regime. It would be very difficult to talk about all the details. However, We protected the rights for the MNOs and also abide by the regulations brought in on the TARPU companies. We came to an endpoint where We are likely to move on with an SLA to bring in quality service for our customers by building our new sites. Okay. Ian's revenues, the next one is for you. Explain the reversal in interest expense in 4th quarter. Yes. This has been a one off, and we had a negative one off adjustments in expenses in 2019 in those lines, taxes and interest. And now reversing this back was a positive adjustment in 2020 as we have Settled a couple of pending issues with our regulators. Okay. Follow-up question, what percentage of data traffic was 4 gs users? This is actually competitive data. We will not be disclosing this. We'll wait a bit more for any further questions. Aswandri, I have one for you. How should one look at the subscriber growth going forward? I think Asumdai? Yes, Maureen. Would you please repeat the question? How should one look at subscriber growth going forward? We do believe that Bangladesh still provides the opportunity for But in the country, it's not yet more than 65% level of absolute penetration. We do believe in with the Extensive rollout we are doing in 4 gs, countrywide and new targets we believe in coming in, we will see growth in subscribers. In terms of 4 gs conversion, how different is output from a 4 gs Summar versus a normal data customer. Again, this is a competitive data. We will not be disclosing this. I have another one. Given the competitive scenario in the data segment are concerned, should we assume single digit data will be the next word? We cannot give out forward looking statements as we are restricted by our SEC, so we cannot answer this question. Another one is, please can you elaborate a bit more on the competition? Aswanbhai, would you like to take this? Can you elaborate a bit more on the competition? This is a competitive market. We have seen during the pandemic and then In the latest date that there is a fierce competition in data front while the industry is growing in the 4 gs users. And also, we have seen that the users from data is coming from all over the country and we have seen growth in the rural areas. So we will Continue staying in competitive. And then we will remain competitive. At the same time, Our focus will remain in the innovation in our product and services and improving our quality of services and a customer experience in our network. We have another one. Can you elaborate on the potential restrictions due to S and P? We have accepted and complied with 3 directives About in June this year, we have complied under protest and we are working with the regulator to further streamline the processes. The 3 directives, those were implemented during this period. One being lock in period, The customers can switch to other operators after coming to DiamondPhone brought down to 60 days. We have now a different rate for interconnection We're down to 7 paisa from 10 paisa for us to get from the competition and then we have the 3rd one, Our product and service approval, which is we need to apply and the blood also will provide that growth within 5 days. We have seen that we are able to work with our regulators to streamline the processes and bringing in productive services for our customers as and when required by getting ready approvals from the Reuters side. Asum, I have one more for you. How do you foresee the data industry going forward amidst of growing broadband WiFi use in the country. What should be the strategy to sustain growth if data segment becomes mature? This broadband WiFi, this area of Overall data mix will increase at the same time with new users of data. We will see always the demand for mobility will remain and we do see an input potential in coming years. And we are continuing building our resilient data network, focusing on 4 gs and experience and bringing in insights. There was a question for voice revenue growth year over year. Yes. On the voice side, revenue growth has been for the quarter year on year minus 5.2% and for the full year minus 7.2%. Okay. At this point, no further questions. We'll wait a little bit. Ian's actually have 1. Number of active J2 users has been flat at 40,000,000 for the last couple of years. Going forward, what are your plans on growing it? I think generally more and more for us. But on the marketing side, nevertheless, I think what we see in there is, of course, that we are pushing for the 4 gs conversion. So the number, As I said, for the 4 gs has significantly increased even being with the full data, but I believe also that has had a slight increase. That is the focus on 4 gs that drives it. And forward looking sorry, to answer the full question then and forward looking statements, of course, we as Nori mentioned, we are not able to give. I see a request for us to disclose our voice and data revenues separately. We will analyze this and we will see what we can do going forward. Thank you. Okay. There are no further questions. I believe we can close for today. Thank you, everyone. If you do have any questions, Please get in touch with me. We will be taking meetings and discussions for over the next few days. Thank you and stay safe. Thank you.