Earnings Call: Q3 2020

Oct 19, 2020

Good morning, everyone. Thank you for joining us today. Welcome to the Q3 2020 Earnings Disclosure for Grameenphone. My name is Noreen. I'm the Head of Investor Relations for Grameenphone. The presentation we are using today, along with additional documents are available on our Investor Relations website. The Q and A link is also live. You can start posting your questions. We will address from at the end of our presentation. I would now like to welcome our CEO, Mr. Yasser Asman, to start the presentation. Good morning, everyone. Thank you for joining us today. Welcome to the Q3 2020 earnings call from Grameen Foon's side. My name is Yassir Asman and has been introduced as CEO of Grumifone. I'd like to begin with some industry highlights for all of Since the end of June up until August, the whole mobile industry has seen a growth of 4,800,000 subscribers And it will be just over 166,000,000 total subscribers as reported by our regulator, BTRC. And then, during the same period, the industry also gained 4,700,000 mobile data users, reaching to 99 Good morning, highlights of this quarter. In this 3rd quarter, Gamifong reported a recovery top line As economic activities in Bangladesh gradually resume back following the initial months of COVID-nineteen pandemic And after reporting a degrowth of 8.2% in 2nd quarter, we ended the 3rd quarter with a year on year Line of 2.8 in our total revenues, which we marked as a very good gradual recovery from the impact of COVID-nineteen in Q2. What we report is 7.5% growth in Q3 of our Q2 2020. We have also resumed our network rollout activities, Reaching over 11,000 4 gs sites at the end of September and it's continuing. The adverse impact from COVID-nineteen continued in Q3, while we faced additional challenges from weather conditions due to the rainfall and floods. We'll get to know more numbers when our CFO will come and present on business performance. Recovering performance while even we accepted S and P in positions in June 2020. Moving on to next slide. Some of the operational updates. The economy of Bangladesh actually Started to show signs of gradual recovery from May. After general holidays declared by the government, which came to the end In some time in May, we have seen the recovery. And throughout the quarter, we As a nation, we have suffered from record rainfall at the same time this year in Q3. We have multiple floods In some parts of the country, the amazing infrastructure and livelihood of people, particularly in the last 2 weeks of September in June. However, our rollout activities were almost unaffected. Revenue had some adverse impact out of this. Our rollout continued in 3rd quarter as we added 1740 sites for your network. There has been a significant shift in the adoption of digital retail during this pandemic. In the 3rd quarter, our Digital Retail volume grew by 59.6% compared to the same period last year. So the jump, what we have seen in Q2, we could sustain in Q3 with further increase into the liquidity charges. Through market execution, revamp of data portfolio and emphasis on 4 gs conversion, We actually gained 2,600,000 new 4 gs users, which have basically made up to reach 17,800,000,000 We have been in meaningful consultations with our regulators and authorities. There are progresses, and we will continue our engagement and constructive dialogue on all other matters. Some matters have seen significant development such as the approval of agreement between GamingPhon and TowerCore, which was on 18th October. As a result, GamingPhon will be able to Start rolling out new sites under the new tower to framework. This will significantly help enhance our network strength process and provide an even better experience to our customers throughout the country, and this is what we were waiting for. However, on Some other matters such as DTSC audit and subsequent court cases, there has not been any progress as of today as the courts have been operating on a very limited scale under the COVID-nineteen situation. We continue our activities to empower Also, Societe, at the end of September 2020, the Raman Fund is charging 77,600,000 total subscriber with its Connectivity Solutions. We're displaying a 4.1% growth from the previous quarter. We are serving 42,000,000 data subs payable during the same period. We have also paid GBP 71,300,000,000 to the National Exeter till September 2020 this year. During the Intu ala in late August, Employees of government fund came together to bring Smile to 40,000 and stabilize children by providing 40,000 meals. That was carried out in partnership with Mr. Rambo from B. Sharma. We have already talked about extensive class situations the country and the payment it has left on the livelihood of all people. India distributed 62,000 flood related packs in partnership with Bangladesh Red Systems Variety, And our ambition is to distribute more and in total one less tax. We are continuing with our platform For most of our workers, we'll further notice. However, our market and Fintech employees, along with customer and They call the pressing employees at Credit Suisse started operations starting from September while exercising steel positions, We have seen that economic activity increased and it is like of COVID-nineteen in this quarter and we are now 7 months of COVID-nineteen in Bangladesh. So far, over We have that 70,000 cases have been reported while the number of deaths have crossed 5,500 in Bangladesh. The numbers gradually declining in Q3 and there have not been any new lockdown or restrictions since May. However, protective measures are in place in most public areas. We have seen increased economic activity in September, representing many business and government offices started operating full hours from the middle of September. However, the educational sector still remains closed and situation still remains uncertain while the dual recovery is fulfilled there as we see. I'll take a pause here, and I'd like to invite and welcome our CFO, Ian Zekar Tekow, to take us through our financial performance in detail. Adyep? Thank you, Asman, And good morning, everyone, and thank you for joining us today. I will proceed with our presentation with an overview of our financial performance. A meaningful financial performance has shown a clear recovery in Q3 after the sharp decline in the previous Quarter due to the COVID-nineteen situation. The recovery is led by an increased economic activity following the gradual withdrawal of most of the restrictions throughout this quarter. After the sharp revenue decline in Q2, mostly in April, The recovery started from May and continued in Q3. In summary, Draminphone had 1.4% year on year degrowth in subscriber and traffic revenue after 8.1% degrowth in Q2. The year on year EBITDA decreased by 3.5%, while we're able to maintain our margin at 63.6%. The CapEx to sales ratio, excluding license and lease, for the quarter stood at 7.1% compared to 6.3% in the previous quarter. EPS for the quarter stood at BDT 6.59 with a 22.4% growth from last year on a reported basis. Now turning to the details and starting with the subscriber numbers. In the 3rd quarter, Grameenphone Subscriber acquisition resumed with 3,100,000 net adds, overcompensating the previous two quarters where we had been where we had negative net adds. Therefore, the subscriber base for the quarter stood at 77,600,000 with a 4.1% growth from previous quarter. According to the information published by BTSC till August 'twenty, GP's subscription market share improved by 0.2 percentage points to 46.4% compared to previous quarter, where it has been 46.2% in Q2. The 4 gs population coverage reached 83.3 percent with 6.2 percentage points increase from last quarter Where we had the 77.1 percent 4 gs population coverage in Q2. 2020 revenue picture, The year on year daily subscription and traffic revenue DSTR growth for the quarter was minus 1.4% compared to minus 2.8 percent for total revenue. As the recovery for total revenue was further impacted by a 30% reduction seen in local call termination rate effective from mid July 2020. In comparison to the previous The total revenue increased by 7.5%, hence, continued to increase and to recover. The €500,000,000 decrease in subscription and traffic revenue was mainly driven by the fall in voice revenue, Contributed was minus €1,400,000,000 partly offset by the growth in data revenue, which contributed positively again with €900,000,000 At the end of the quarter, GP is yet to reach a positive year on year growth. On the data specifically here, as in Niket, before, our data revenue continued with double digit growth of 11.4% in this quarter. The growth in data revenue was driven by 8% Increase in data ARPU and a 3.4% increase in data users. Data user acquisition in Q3 Was positively impacted by an accelerated drive on the expansion of our 4 gs network capacity along with a continued focus on 4 gs conversion. Data users for this quarter stood at 42,000,000, including 17,800,000 4 gs data users. Overall data user increased by 1,100,000, while 4 gs data users increased by 2,600,000 during this quarter. GP continued providing its customer better value through Attractive market offers, including segmented campaigns and bonus on 4 gs data packs. As a result, GP's average usage, The average megabyte per user grew by 46.5 percent to around an average 2.58 gigabyte per user, leading to an 8% growth in data ARPU. The service ARPU recovered to its 3.4% Degrowth after 8% 8.2 percent degrowth in the previous quarter. The lower service ARPU was mainly driven by lower contribution from voice and interconnection and as mentioned, partly offset by higher contribution from data. Now turning to the OpEx development. Our efficient OpEx management led to a year on year 0.9 percent OpEx reduction, Including our flood related CSR contribution that Asman mentioned before, with the lower OpEx in Q3 Being mainly influenced by lower revenue driven costs and lower overhead expenses, the OpEx for the quarter stood at SEK 10,800,000,000. On the EBITDA side, we posted a year on year 3.5 percent degrowth in Q3, mainly driven by the lower revenue after minus 10% in the previous quarter. In terms of margin, we maintained a 63.6% EBITDA margin in Q3, which is 1.2 Percentage points higher than previous quarter. Next page, please. On the investment side, we had continued momentum with CHF3,200,000,000 CapEx, Excluding the license and lease in Q3 and focused mainly towards acceleration of the 4 gs network expansion. We were able to roll out 10 70 new 4 gs sites in Q3, reaching 11 1421 4 gs sites at the end of Q3. Now turning to profits. Our net profit for the quarter stood at SEK8.9 billion, reflecting a year on year 22.4% growth, resulting mainly from one off adjustments in the tax line in the previous year Q3. Net profit margin in Q3 3 stood at 25%, showing an improvement by 5.2 percentage points from previous year and 3.1 percentage points from previous quarter. Whiskey's earnings per share were recorded at BRL6.59 billion. The year on year CHF 1,900,000,000 degrowth in operating cash flow was driven by CHF 1,100,000,000 higher CapEx and €800,000,000 lower EBITDA. On net debt, GP stood at €5,000,000,000 in this quarter. The CHF 4,100,000,000 increase in net debt from previous quarter was mainly contributed by CHF 3,800,000,000 higher liability and CHF 0,300,000,000 lower cash balance, excluding the restricted cash. And then finishing my presentation with GP's contribution to the Exchequer, where in the 1st 9 months of this year, we have contributed around €71,000,000,000 BDT, equaling 68% of total revenue. With this, I would like to welcome back Asman. Thank you. Thank you, Jens. I would like to highlight 2 things at the end That we are experiencing positive impact on our business performance and growth from the gradual increase of economic activities in the country and our planned investment, of course. However, uncertainties remains, as I mentioned, out of COVID. As of today, development is positive. The second thing is that through planned investment, we will continue to expand our network and enhance the experience of our customers. Our dedication to our communities remains strong, and we are committed to use our technology expertise in supporting the recovery of COVID-nineteen in Bangladesh. Thank you, everyone. I hand back to Nourin for Q and A session. So the first question we have is from Citi Brokerage Limited. Will GP lead the data price cut in the industry to gain more market share in data revenue segment? Yes. Gamil Fon has actually booked the deposit as non current assets, which is directed by the Ronald Global division And this accounted for as per the requirement of IFRS. Just going back to the first question from Citi Brokerage, will GP lead the data price cut at industry? And will GP get closer? Yes. I have got actually the second question in my window. It was a previous question, right, Noreen? Yes. Yes. DPE offers relevant voice data products with superior value and experience in the market with competitive prices. We cannot give any forward winning statement or comments on our price. Number of 4 gs subscribers as of today stands at 19,100,000. Is there any particular reason for flat average mobile users in q3 compared to q2? It's actually not a flat user. There has been a growth. 4.1% growth As I reported in subscribers growth, however, if the question was flat average MB Our price per users are flat, while data users grew by 2.8% quarter on quarter. The question from Consiglio, revenue per minute for voice adjusted for revenue continues to decline. Are we yet to roll back free minutes offered during COVID? What percentage of revenue comes from promotional SMS? We will come back to you on this. Yes, but generally, we don't disclose these details. There's no relation with the ongoing pandemic and the employee size. Yes. That is not what we see any connection at this point. And we also don't give any forward looking statements. As you know, we are not allowed to. So another one from Consolium, 1,300,000 increment to the conversion to 4 gs sim users within 1 month. This is It's actually not within month month because Surges and users have been reported quarter over quarter, and I believe we've already answered this question. I believe we have a strong planned investment rolled out in Q3. At the same time, we have seen the economy has been recovering. Yes. Let me take the question. This It's a question on where do I see it on the effective tax rate. Elaborate on the reason behind lower effective tax rate In Q3, actually, it's in comparison a lower effective tax rate, if I recall correctly, 44% that we had and It is compared to previous year to last year's quarter, 57% was the effective tax rate. So we are back to Our normal level of tax rate that we had, so the reduction is basically coming from the high base that we had in last year's Q3, Well, we had some one off adjustments in the tax line. So we are not on a lower take. We are on the normal tax rate that we are Just in comparison to last year, where we had the one off adjustments in the tax line, as you might recall, This is a reduction. Can you please elaborate a little bit more on on Talico Licensing and the impact on your books. I believe this is a bit early to comment. That's a bit early to comment. Yes, Questions related to Taurico, let's elaborate a bit more on terms on Taurico. Again, it's a bit early to comment. We have only received approval yesterday. So Please give us a bit more time. Yes. I think there's a question to the average megabyte per user In Q2 being 2.6 gigabyte, Q2 2020, so the previous quarter compared to 2.58 in Q3. And the question is any particular reason for this being flat. I think we had in Q2, so in the previous quarter, quite a hike when all the which now has been flattened on this, so but still on a very high level and a Strong 45% growth compared to last year. No, there doesn't appear to be any more questions. So thanks, everyone. Thank you for listening in today. In case you have questions And you would like to get in touch with us, please send me an email. We are happy to take on meetings or answer your get back to you. Sorry, I see one more. What should be CapEx incrementally? Yes, Shubhrant. I just got the total CapEx and the So 6,000,000,000 plus. Yeah. But the question is a bit vague. Yeah. So I think that's what we can Sales reported. If it's meant to be what What was the CapEx for the quarter incrementally or? So I don't know what exactly is meant by this question, what should be the CapEx incrementally, but if it's meant The quarterly CapEx stood at 3,200,000,000 for Q3. Okay. There won't appear to be anything else. So again, if you have any other questions, please feel free to get in touch with me. We can also set up meetings if you require. Okay. Thank you, everyone. Stay safe. Thank you.