Good day, ladies and gentlemen, and welcome to the Airtel Africa nine months and Q3 results conference call. All participants will be in listen-only mode. There will be an opportunity to ask questions later during the conference. If you should need assistance during the call, please signal an operator by pressing star then zero. Please note that this call is being recorded. I would now like to hand the conference over to Segun Ogunsanya. Please go ahead, sir.
Thank you for joining us on today's call. For those who may not know, my name is Segun Ogunsanya. I'm the CEO of Airtel Africa plc. On this call, I'm joined by our CFO, Jaideep Paul, and our Deputy CFO of Investor Relations, Pierre-Yves Denez. We'll shortly be answering any questions you may have. First, I would like to provide you with a brief overview of the quarter. I'm pleased to once again be able to report very strong growth across all of our key metrics. Before I go into the details of the financial numbers, it is important to know that these are an outcome of the continued strength of our operational performance.
This quarter, we have returned to strong growth of our customer base in Nigeria, our largest market, adding almost 2 million customers in Nigeria and taking the group customer additions to 3.1 million this quarter. We continue to invest in our network and in our distribution infrastructure with 4G now installed at 83% of our tower sites. In November, we won approval for both the PSB, Payment Service Bank, mobile money, and super agent licenses, giving us even further impetus for unlocking the mobile money opportunity available from a market with a total population of around 200 million people, the largest in Africa. I will talk in more details about this and some of our strategic and operational developments this quarter in a moment. Now let me summarize the key financial outcomes.
Our Q3 posted very strong growth, with our group revenue reaching $2.2 billion with a constant currency growth of 20%. With continuing improvement in our operating efficiency, this led to even stronger growth of 26.8% in EBITDA to $605 million. Data and mobile money continue to be our key service growth drivers, together contributing to 44% of our group revenues in the quarter. We also continue to see a strong growth in our voice revenue. It is up almost 10% year-on-year. Our customer growth rates are finally returning to the levels seen prior to the introduction of the new Know Your Customer requirements introduced in Nigeria in December 2020.
In the last quarter, we added 1.2 million group, about 2 million of this in Nigeria, taking our total year-on-year growth to 6.9 million customers or about 6%. Voice revenues posted year-on-year growth of 9.9%, almost 10% in the quarter, slightly lower than the 18% growth we had in Q1 but still reflecting year-on-year customer growth of 5.8% and a voice ARPU growth of 5.2%. We still fundamentally believe that due to the low unique customer penetration levels across our footprint, our 14 countries, combined very low minutes of usage, there's still a very, very long runway for voice revenue to continue to grow.
Data ARPU customer growth rates of 11.1% year-on-year was posted, with particularly strong data ARPU growth of 24.6%, delivering very strong data revenue growth of 37.7% year-on-year. Mobile money posted similar decent metrics with Q3 revenue growth of 29.2% year-on-year. This was due to strong transaction growth of 28.7%, with active customer base growing by 19.6% and ARPU growth of 8.1%. While still very strong, our growth rate is slightly lower than what we were expecting, mainly because of some new levels imposed in Tanzania in the June quarter. We'll be a few quarters before this falls out of the baseline. Excluding Tanzania. If you exclude the numbers from Tanzania, our mobile money business grew 37%.
All our regional segments, Nigeria, Francophone, and East Africa continue to demonstrate very high revenue growth rates. Nigeria grew by 23.3% year-on-year. East Africa, 31.9%. Francophone Africa grew by 18.5%. The strong growth rates and improved operating efficiencies led to increased flow through to underlying EBITDA margin in the quarter up to 49.6%, a jump of almost 270 basis points over Q3 of last year. Unfortunately, foreign exchange changes had an adverse impact of $16.2 million on constant currency revenue and $6.6 million on our underlying EBITDA for the quarter. This is largely driven by devaluation of Nigerian naira and Central African franc, but partially offset by appreciation of the Zambia kwacha and Ugandan shillings.
In terms of the balance sheet and cash flow, at the end of December, our leverage ratio was 1.4 times underlying EBITDA, with our net debt lying at just over $3 billion. In Q3, we generated operating free cash flow of $480 million, which is $120 million more than in Q3 of last year. This is largely down to improved EBITDA. This morning, we also announced our intention to redeem our $500 million 2023 bonds in March this year, much earlier than their maturity. There are a few other strategic and operational announcements I would like to highlight for the quarter.
Perhaps the most significant recent news flow concerns our receipt of approvals in principle sometime last year for both a Payment Service Bank or PSB license and a super agent license both in Nigeria. We are currently working very, very closely with the Central Bank of Nigeria to meet all the conditions to receive the final operating licenses and commence operations in Nigeria. This will enable us to expand our digital financial products and reach the millions of Nigerians who up to now do not have any access to traditional financial services. Also in Nigeria, we announced in December that we have completed the buyout offer for Airtel Networks Limited, our Nigerian subsidiary. This has resulted in our group now owning 99.96% of our largest subsidiary after paying $147 million for the 8.22% minority holdings.
Regarding the NIN/SIM Know Your Customer regulations in Nigeria, the deadline for finalizing registration has been deferred multiple times since the rule was made sometime in December 2020. It's been deferred to March 2022 now. We continue to make further progress in capturing NIN and verifying this with the National Identity Management Commission mainly. A lot of improvement are still required in the connectivity for all operators, not only us, all of the operators in the country, with the National Identity Management Commission database. We've also made further progress on our asset monetization and investment opportunities for the group. We announced the first closing of our tower sale in Madagascar in November, for which gross proceeds will be around $52 million.
Just around the quarter end date in January of this year, we also announced first closing of our towers in Tanzania for the receipt of an initial $159 million of the $176 million gross proceeds. Out of this $176 million dollar gross proceeds, $60 million will be used to invest in network, so it's infrastructure and for distribution to the government of Tanzania as one of our shareholders. We've also received $175 million further proceeds from the second closings of the Mobile Money minority investment transactions with DerivFund, Mastercard, and Qatar Investment Authority in November of last year. We are also able to announce Chimera as an additional investor putting $50 million in early December. In total, we have received $550 million from the minority stake sales in Mobile Money.
Finally, in November of last year, we launched our sustainability strategy during our half year results. I am very, very pleased that we have concluded our five-year pan-African partnership with UNICEF, including financial and in-kind contributions of $57 million. We're working with UNICEF to accelerate the rollout of digital learning through school connectivity and free access to learning platforms across 13 of our 40 countries. By providing equal access to quality digital learning, particularly for the most vulnerable children, our partnership will help to ensure that every child has a real opportunity to reach their full potential.
In terms of COVID, and despite the COVID-19 pandemic seemingly diminishing in terms of impact on our reported results, we're still very vigilant given the potential for yet more new strains of the virus and any further actions that may be required by governments to minimize the spread in our territories. More fundamentally, the opportunities for sustainable profitable growth that stem from our underpenetrated markets for mobile voice, for data, and for mobile money. I'm still very confident that we'll continue to deliver on our growth strategy. With that, I would now like to open the line for questions for which I'm going to be joined by Jaideep Paul and Pierre-Yves Denez. Operator, I now hand over to you to please open and manage the queue and this session. Thank you.
Thank you, sir. Ladies and gentlemen, anyone. If anyone wish to ask a question, you are welcome to press star and then one on your touch-tone phone or on the keypad on your screen. If you, however, wish to withdraw the question, you may press star and then two to remove yourself from the question queue. If anyone would like to ask a question, you're welcome to press star and then one. Our first question is from Maurice Patrick of Barclays.
Well, hi, guys. Thanks for taking the questions today. I just have two or three quite quick ones. First question is on mobile money. Did I hear you say correctly that you grew 37% if you exclude Tanzania? I guess the first question. Is that the right?
Yes. If you exclude Tanzania, the growth is 37%.
Great. What was the mobile money revenue growth in Tanzania?
In Tanzania, we actually had a small decline versus previous year. Like I said in my initial introduction, the government introduced some levies in the quarter end of June, and those levies affected P2P and cash out. Customers just moved away from mobile money to other alternatives. Working with the government, they reduced the levies, but the levies are still relatively high. We continue to cycle the impact of these high levels on mobile money in Tanzania. It's an industry-level problem, not only limited to us.
Has there been any recovery in the Tanzanian mobile money revenue since then?
Yes. They slowed down the deceleration in the quarter when this increase in levies came in the June quarter. We did have a very high level of deceleration. The growth is virtually declined. The Q3, end of December, we managed to bring back some of the momentum. I'm looking forward to neutralizing the impact of these levies sometime before the end of this financial year.
Okay, great. Thanks for that. If I can ask on Nigerian mobile money, I'm not sure if you said it in your prepared remarks, but do you have an expected timing for launch of services in Nigeria?
We got approval in principle sometime in November of last year. The Central Bank indicated in the approval, in the preliminary approval, that they require about six months. Six months will take us to March, so we hope that we would get the final approval before the six-month deadline that the Central Bank indicated. In principle that was granted to us. We have no control over that. It indicated that within six months, they would grant the final approval. We're working within this timeframe.
Okay. Final approval before March 2022. Then how long will it take you to, roughly speaking, to launch services, do you think after that?
You know, we've been working on launching mobile money in Nigeria for the last two years, so I'm pretty confident that we're ready to launch as soon as we get the license. We're confident that we'll launch as soon as we get the license.
Okay. Is there any reason why the penetration of mobile money in Nigeria shouldn't follow the trends in other markets where you have the service?
We continue to execute mobile money the way we've done in 12 of our countries using distribution and focusing on the very smooth customer journey. I see no reason why the path just will be very different in Nigeria.
Great. Thank you so much indeed for the answers.
Our next question is from Rohit Modi of Citi. Please go ahead. Rohit, your line is live. Please go ahead. It seems there's no response from that line. Our next question is from Nikhil Mishra of HSBC. Nikhil, your line is live. There is also no response from that line unfortunately. Our next question is from Tajudeen Ibrahim of Chapel Hill Denham.
Hello, everyone. Good afternoon, and thank you very much for the call. I think it will, you know, be nice if you can let us know what sort of difficulties do you see to the CBN granting you a final approval on the PSB. I understand that they require that you meet some conditions, and it would be nice if you can share with us your views on those conditions in terms of, you know, meeting those conditions. Thank you very much.
Yeah. As Central Bank, they've listed some conditions. None of the condition is difficult to meet, I must say. They are traditional conditions which are required if you're gonna work in the financial sector. Once again, I see no reason why we're gonna be unable to meet any of those conditions. They are purely routine, some regulatory, but they are fairly easy to meet. I see no reason why we're not gonna be able to meet any of them in time for the launch.
Thank you. My second question is around 5G license. Would you please, you know, speak to the 5G license, as you did not, you know, win that license, when it was auctioned? Can you please speak to what we should expect, you know, in the short to medium term in terms of how you respond to competition in that space?
We do have enough spectrum in different bands in all of our countries to run 5G whenever we choose to. I believe that the use cases for 5G, they're not yet fully developed. They are evolving. Over years, I expect them to be fairly developed. In the meantime, if there's any need for us to launch 5G, we have sufficient spectrum in other bands to launch 5G in our countries.
Okay. Sorry. The country in this case is particularly Nigeria. So that's what I was referring to.
I'm confirming to you that if we choose to launch 5G in Nigeria, we do have sufficient spectrum in other bands to launch 5G when we choose to.
Okay, thank you very much.
You're welcome.
Next question is from Madhvendra Singh of HSBC. Please go ahead.
Yes. Hi, can you hear me?
Yes, please.
Okay, great. Thank you. A few questions from my side. Just a clarification firstly on the previous one. I assume that it means your license in Nigeria is technology neutral, so you can do you know 5G on your existing license. That's first clarification. The second question I have is on your growth rate in Francophone markets. There appears to be some slow growth there. Just wondering if the issues there are more temporary in nature, or is there any specific structural reason, any specific markets which are kind of weighing on the overall growth? That's the second question. Then the third one is on data consumption.
Generally, looking at your data consumption within the, you know, three clusters you have, just wondering what kind of trend you are seeing there in terms of year-on-year growth rates, and whether you see that growth rate being sustainable in the future, or you see some slowdown in the data consumption trends going forward?
Okay. Let me start with the simplest one. You're asking if in Nigeria we have a spectrum technology neutral. I can confirm to you that yes, you can deploy whatever technology you want in Nigeria on any of the spectrum bands we have. It is technology neutral. Your second question is on Francophone. You're wondering why the growth rates were muted. Yes. We had a couple of headwinds in one or two countries that slowed down the growth, especially on voice revenue. Some changes in interconnect rates in two countries slowed down the growth. What we did was to really double down on operating efficiencies. Even though we muted the top line growth, we still had the EBITDA margin in the region, north of 40%, which is in the right direction, given where we were two or three years ago in Francophone countries.
Remember we lead through investing in 4G. With the accelerated investment in 4G in the last couple of years, we're seeing the results. Data revenues continue to grow very rapidly. The slowdown we saw was countries where we are changing the connection rates during the period under discussion. The last question is on the sustainability of data revenue. As you know, we don't give forward guidance. All I can say historically, we've delivered very strong double-digit growth in data revenue. What are the key drivers of data revenue? One is our 4G network. We continue to run our 4G footprint. Second, 4G devices. We continue to see increase in penetration of 4G devices in our countries. As we see increased use of 4G, we see a lot more data being consumed.
Therefore, in the last couple of months and years, we've seen a lot more 4G devices coming into our markets, post COVID, post disruption caused by COVID. I think the trends continue, increased 4G penetration. We're still gonna continue to invest in distribution. We're gonna continue to invest in expansion of 4G footprint. As I speak now, in Nigeria, almost all of our sites, I mean have 4G. The number of our 2G sites is less than the number of 4G sites. In East Africa, close to 80% of our sites already have 4G on them, and in Francophone Africa, we're close to 75% of our sites having 4G on them. Those two key drivers would continue to support consumption of data in our territories.
Great. I have one more question on the 5G side. What is your view on 5G as a last mile home broadband enabler in Africa generally? Do you think that is the real opportunity of 5G in Africa?
Given the fact that we have a very low level of fiber broadband in Africa, I believe that 5G may be a good complement to fiber broadband. It's never gonna replace fiber broadband. I think both can be used to complement each other. There's a role for 5G to play in home broadband.
Great. Thank you very much for your answers, and congratulations on your great set of results. Thank you.
Thank you very much. Thank you.
Next question is from Faisal Al Azmeh of Goldman Sachs. Please go ahead.
Yes, hi, and congratulations on the strong set of numbers again. Maybe just a few questions on in terms of outlook and just to help to understand how the interest or financing cost has been changing over the quarters. How should we think about that over the coming quarters? We've seen a meaningful move up Q on Q. If you can give us some color on that. Maybe just again, I know we do repeat this question quite often, but just generally on CapEx, do you feel comfortable where CapEx levels are, or should we expect them to move a bit higher into next year as you ramp up production, sort of ramp up new operations in Nigeria? Thank you.
I'll take the CapEx question first, and Jaideep Paul would address the financing question you asked. In terms of CapEx, I believe with CapEx around $650 million, $700 million, $750 million mark, we're gonna be able to cover business in our 14 countries. I don't see any rapid increase beyond the wide band of $650 million to $730 million, $750 million in CapEx investment in our 14 countries, including the investment we're gonna make behind the mobile money opportunity in Nigeria. Jaideep Paul, if you want to respond to the financing question, I can take it but go ahead.
On the financing question, let me first say that in quarter two, if you see our announcement, we mentioned that we had a one-off benefit there coming out of Tanzania settlement, and we had roughly about $14 million of benefit in Q2. From a Q2 to Q3 movement, we need to add back that $14 million in the interest cost. If you add it back, it remains absolutely between Q2 and Q3. We also have an interest on these obligations, which is more or less again at the same level, marginally increased because of the number of sites which have gone up. That's the finance lease obligation, that interest component also classified under the finance cost. These are the two major items.
There is a derivative and exchange loss of roughly $40 million. That's predominantly coming from the devaluation in few countries. That impacted us by about $40 million because of that devaluation. That's the construct of $122 million of the total finance cost for Q3.
Thank you.
Our next question is from Tracy Kivunyu of SBG Securities.
Good day. Thank you so much for the presentation and congratulations on a great set of numbers. 2 questions from me. First, what is the drivers behind the slowdown in voice revenue growth in Q3 of 2022 in Nigeria, considering that you had quite some strong net adds in the same quarter? Second, could you please share with us some data points on smartphone penetration across Nigeria, East Africa and Francophone for comparison? Thank you.
Okay. In terms of voice revenue in Nigeria, last quarter, the quarter ended December, was particularly affected by government's instruction that a number of sites will be shut down in the northern part of the country. As you may be aware, there were some issues in the northern part of the country with some terrorist activity been heightened in the last quarter. For security reasons, the government asked all the operators to shut a number of sites. That affected outgoing voice revenue, and it did impact the voice revenue that came out of Nigeria despite the fact that we did manage an increase in the net addition. More or less that was what happened to us in Nigeria. I'm glad to say that most of the sites have been reopened now.
They were reopened some late December, some in January. We're over the worst now, so we should begin to see voice revenue grow very soon in Nigeria again. Look at the question on the 4G and the smartphone penetration. I just give you a couple of examples in countries. If you look at Nigeria, for instance, smartphone penetration is about 40%. If you go to probably most advanced country, Gabon, we've got about 60% smartphone penetration, 4G around 40%, 3G is 20%. In the range, we've got one of the lowest in Rwanda. In Rwanda, the smartphone penetration is only 16%-17%. You can just take an average of between 16%-17% in Rwanda, about 40% in Nigeria, and about 60% smartphone penetration in Gabon.
Out of the smartphone, then if you want, we can see we have 4G, but smartphone combination of 4G and 3G.
If I may ask a follow-up to that, then why are we seeing the lowest data usage per customer from the Francophone region if we're able to reach such high smartphone penetrations in some of the subsidiaries located in that region?
Yes. I just mentioned, I mean, Gabon. Gabon is an outlier. Gabon is not representative of all the countries in Franco. Gabon is certainly the highest for us in all the 14 countries. We've still got a number of countries where smartphone penetration is still relatively low. As I said in my opening remarks, we were a bit late in investing in 4G in Francophone. We're just catching up. When you compare the number of 4G sites we have in Franco as a percentage of total sites, it's relatively lower than we have in East Africa and in Nigeria. That's one of the key reasons why we have a slower data revenue growth in Franco compared to Nigeria and East Africa, but we're catching up.
Great. Thanks, Segun.
Our next question is from Stephanie Wu of HSBC. Please go ahead.
Hi there. Thanks very much for the presentation. I wanted to follow up on the UNICEF initiative you highlighted, the Education for All. Can you give us some more detail around, you know, what does this entail, from the Airtel side? You know, what's the potential reach? And are you looking to provide devices for kids? And then related to that, maybe, you can talk a little bit about what the Google tie-up with 5G might mean for Airtel Africa as well. And, you know, are there any plans to kind of launch devices or sell devices into your 14 countries and, you know, again, tied back to the UNICEF initiative?
Thank you. Excellent question. The UNICEF partnership is one of the initiatives under our sustainability agenda. Like I said, I launched this in November of last year, and I'm very excited as to what we're gonna be doing with UNICEF to create digital inclusion in 13 countries in Africa. What are we doing with UNICEF? We gonna give 1,400 schools internet access. We're gonna give over 1 million children access to digital education. Beyond that, we're gonna make a number of sites free to access. You don't have to spend anything to access some of those educational sites. It's a combination of three clear initiatives, internet access to some schools, zero fee access to some educational sites, and supporting the schools with digital technology.
All of this came to $57 million we're putting behind it, most of it in kind, some of it in cash. That's a good summary of what we're doing with UNICEF. Every country is working with the local UNICEF office to deploy those initiatives. In terms of the Google partnership, yes, the partnership was signed between Airtel India and Google. We're two different entities. If there's a need to leverage on any opportunity, we will. We are two different companies for now. If there's any opportunity to leverage on what they've done in India, I will speak to my colleague in India and find areas of synergies between what they've done and what we need to do in Africa.
Okay. Thank you. Just to kind of I'm sorry to ask again, but just in terms of accessing obviously, educational and services, are you going to be providing devices as well? Because without the devices or device penetration is still relatively low per household, right? Are you providing devices-
It depends on.
to the children?
It depends on the needs. I mean, there are certain countries the needs are gonna be different. We're gonna be working with UNICEF. They're gonna tell us what they need, and based on what they need, we would assess and decide where we best placed to really offer the support. Nothing is excluded. It's on a country by country basis. Whatever is required in a country to provide access, we work with UNICEF to deliver the access.
Okay, great. I just had another question on Naira convertibility and, you know, monies in Nigeria. I mean, what is the current. Can you give us an update on, you know, the Central Bank stance, the queue to repatriate capital from Nigeria, et cetera, et cetera. Can you give us an update?
We operate in a number of countries, I mean 14 countries, and we continue to maintain sufficient cash balances in HQ to take care of our cash requirements. I just want to put your mind at rest that we do have sufficient cash balances in HQ to take care of our cash requirements. Specifically in Nigeria, we've had some challenges in the last couple of years, and I believe that the Central Bank is probably in a better position now, given the increased prices of oil, to moderate the liquidity problem in the country. We don't take Nigeria in isolation. We look at a portfolio of countries. Given the fact that we've got flows coming from 13 other countries, are we concerned? Yes. Is that gonna be a major? No. We continue to invest in Nigeria.
We continue to use our Naira balances, I mean, to pay for spectrum. You've seen what we did last year by buying out minority shareholders in our largest operation in Nigeria. We do have sufficient requirements that we deploy our Naira balances to serve for now. We have ways of taking care of the CapEx requirements. I can confidently say that I don't see any barrier to continue investment in operations in Nigeria.
Just to clarify, I mean, currently Nigeria revenue contribution is nearly 40% or so. You know, if we get the license and, you know, mobile money really kicks off, I mean, how large is Nigeria contribution going to be, you know, if everything goes according to plan?
My plan is to grow every country in the portfolio. We've got 14. We continue to grow all of them. Of course, I love Nigeria to keep growing. In as much as, myself and my colleagues are gonna continue to grow the other 13 countries.
Thanks so much.
Ladies and gentlemen, this is just a reminder. If you wish to ask a question, you are welcome to press star and then one on your touchtone phone or on the keypad on your screen. Our next question is from Vikhyat Sharma of RMB Morgan Stanley. Please go ahead.
Thanks for the opportunity. I was more interested in your partnership with Flutterwave that you've done. Somehow, you know, it's mostly in East Africa. Nigeria still kind of kept out of it. I think the potential of, you know, now that mobile money is kind of probably, you know, getting in credits with this PSP and your super agent license, do you plan to obviously have that kind of a tie-up with the, you know, these money transfer apps in Nigeria as well?
We do have both partnerships with international money transfer companies, with Western Union, with a number of banks as well across Africa. Almost all of those partnership we believe will get to Nigeria once we commence operations in Nigeria. In terms of Flutterwave, we also have a couple of opportunities to partner Flutterwave and other payment gateways in the country. These are not exclusive contracts. We continue to explore what is best for every country. We're very happy with our partnership with Flutterwave in East Africa, indeed. Once we clear as to our license conditions in Nigeria, we'll explore available partnership with Flutterwave and other payment gateways in Nigeria as well.
Thank you.
Thank you. Our next question is from Maurice Patrick of Barclays. Please go ahead.
Yeah, thanks. Sorry to come back for some more, but it's, you know, very interesting set of results and circumstances you're in. If I can ask a couple more questions. First of all, in the next 12 months, do you foresee there being any more spectrum auctions or spectrum allocations or grants in your market at all?
A couple of spectrum or licenses are due for renewals. In Nigeria, we're gonna renew our spectrum for 3G in the 2.1 GHz band. That is due for renewal sometime in about 2-3 months' time. Other countries, I mean, do come up for renewal at different times. Yes, we're gonna pay for renewal of licenses in a number of countries in the next financial year.
There are other ones. Are those in much smaller markets or are you able to spell out which markets?
The biggest is always gonna be Nigeria. Nigeria is always gonna be the biggest, yes. Actually 2.1G that is.
Should we use the kind of the most recent spectrum auction results as the kind of the right benchmark for the likely cost of that?
We've not engaged the regulators, so I don't have the formula they're gonna use. If you look at historical renewals, they've always been based on whatever amounts that were paid when the original spectrum was issued, and those figures are usually converted into Naira at the current rate. That's what we've done in all the previous renewals. I mean, of course, I don't speak for the regulator. I'm not sure what they're gonna do. We're gonna start a conversation with them in another couple of months and be in a better position to predict how we're gonna come through the conversations. In the past, it has been based on historical figures.
A separate question, please, just on operating leverage. You've shown consistently strong EBITDA growth across your markets in the last couple of years, especially. Can you sort of help us walk through kind of the mix of like gross margins, COGS? Just give us a sense of like, if you keep growing at 20% where EBITDA margins can end up. Thank you.
I would ask Jaideep Paul to get into the details, but we continue to deliver results through expansion in our top line. We've been growing very strong double digits in the past, north of 20%. We also continue to optimize on our expenses. Our growth is driven by two key aspects, growth in the top line and optimization of the expenses. Those are the two key drivers of our performance. I'm gonna ask Jaideep Paul to go into the details. Jaideep Paul, please.
Okay. Firstly, let me clarify, I won't be able to give any forward-looking guidance or any indicative number. I can quickly tell you the general model which we follow. The model is very simple. Our endeavor is to keep the EBITDA flow through at a 55%+ level, 55% level. That means if we are generating incremental revenue of $100 million, we should expect at least a 54%-55% flow through in the margin, EBITDA margin. After considering the interconnect cost, the incremental site running costs, the sales and distribution costs, marketing and other administrative expenses, and so on and so forth. Broadly, the
As you see in our P&L, if you look at our P&L, most part of the cost is the network cost and the sales and distribution cost, apart from human resource expense and a little bit of marketing and some marketing spend. These are the four items. Out of which, the human resource expense is more like a fixed cost. Sales and distribution is a variable cost because we pay, and it's a predominantly prepaid market, so we pay an average margin of 7%-8%. There's an interconnect cost which is deducted from the revenue. There is a network cost, which is variable as well as fixed. That means once I put the tower, then it becomes my fixed cost.
If you look at all this modeling, and then of course we have the regulatory expense, which is again a very variable expense, so because it is primarily linked to the revenue, primarily. That's the way we try to, you know, engage our model whenever the incremental revenue comes up. At least that is our endeavor to keep a flow through of 55% in the EBITDA margin.
That's helpful. Thank you. Congratulations on the admission to the FTSE below 800.
Thank you.
Thank you. Our next question is from Tajudeen Ibrahim of Chapel Hill Denham. Please go ahead. Tajudeen, your line is live. It seems there's no response from that line. Our next question is from Oluwaseun Sagonsonya of Stanbic IBTC. Please go ahead.
Okay. Good afternoon. Can you hear me?
Yes, we can.
Yeah. Sorry, I just want more context to the asset monetization that you spoke about earlier. You mentioned that you had a program or initiative around asset monetization. I would like if you can provide more details on that. How is that affecting the overall strategy of Airtel Africa.
Sorry, can you repeat the question? I didn't get the first part of it.
You said you mentioned about one asset monetization program that you started.
Yes.
Could you please provide more context to that? How is that affecting your overall strategy?
Okay. It's basically around the assets that we've been selling. We started with the towers a couple of years ago. In the early days of telecoms, you needed the tower for competitive advantage. For now, the towers are not necessary for you to really run an efficient operation. We started selling our towers years ago. We still got about two to go. We have Gabon. We have Chad. We put Malawi up for sale as well. Like I said in my introductory remarks, we just collected some money for the towers in Tanzania. We've sold the balance of our towers in Rwanda. We've sold Madagascar. That's a key element of our asset monetization program, selling what we consider to be non-core and non-strategic to our strategy. That piece is one of it.
The second thing is what we've done around the mobile money business. We've sold minority interest. We've collected $550 million selling about 21% of our mobile money business. That is second piece. We continue to explore opportunities that would bring cash but would not affect the implementation of our strategy. Okay, thanks so much.
Ladies and gentlemen, just a final reminder, if anyone else would like to ask a question, you are welcome to press star and then one. We have a follow-up question from Stephanie Wu of HSBC. Please go ahead.
Hi again. Just wanted to follow up on the monetization. I think previously, after the Mastercard, TPG and QIA investment, I think maybe there was some messaging that you wouldn't be selling anymore. The next kind of monetization would be the IPO at some stage. Can you just talk about how Chimera came in here and, you know, whether there's going to be kind of further sell down and, whether maybe the IPO timing is pushed back or is it still on track? How we should think about, you know, inviting additional kind of private equity investors in ahead of the IPO.
Chimera came in at a very small amount, $50 million, and that came in in the December quarter. Beyond Chimera, we don't have any immediate plans of selling down additional equity in the money business. In terms of IPO, we gave a guidance in March 2021, when we started, that we're gonna do IPO within four years. That timeframe still remains. We've not changed our plan of having an IPO within four years, which is four years from March of 2021.
Thank you.
You're welcome.
Our next question is from Tajudeen Ibrahim of Chapel Hill Denham. Please go ahead.
Thank you very much. Just a follow-on question. Is it likely that you consider inorganic growth in your FinTech business? You know, speaking around the mobile money business, can you speak to that?
We continue to explore opportunities for growth. We're in 14 countries. Our mobile money business is in different stages of development in each of the 14 countries. We've got about six countries where we've got very, very good mobile money business. We've got another five or six countries where the mobile money business is still at the early stages. It's a mixed bag of fairly developed countries, highly penetrated, and some countries lowly penetrated, still at the early levels of maturity. I think we do have enough to extract the value from. In addition, we have this mobile money opportunity in Nigeria. Meaning that in 14 countries, we do have enough scope for growth. I mean, we don't say no to any opportunity. We keep on looking for any other opportunity, assets to look at.
For now, the focus is on growing what we have within the 14 countries.
The next question is around your cash expectations in terms of how you utilize you know cash going forward, considering the moderation in the leverage and also the fact that you you know redeeming your bond earlier than expected. You know, beyond March, you know, what would be your priority in terms of disbursement of cash?
I'm gonna ask our CFO to speak to that. It's very clear as to what we want to do with our balance sheet. One, we want to reduce debt in foreign currency. Two, we want to push as much debt as possible to the OpCo. We don't want any foreign currency debt in the Holdco. The intention is to reduce leverage to a level that we're very confident with. I'm gonna ask Jaideep Paul to speak to the details of this. Jaideep Paul, please.
Yes. I think largely, Segun, you have covered most of the part. I just want to add that, as you have seen, we are paying off one of the bond, prepayment of about $505 million of bond. Today that announcement has been made. The next obvious target is to get ourselves ready for payment of the balance $1 billion bond at the Holdco level, which will be falling due in May 2024. So we'll be obviously getting ready for that. As Segun has mentioned that we don't intend to keep any debt, which is very inefficient from a tax perspective, to keep any debt at a Holdco level.
The endeavor is to also push down debt as Segun mentioned in the OpCo in local currency as much as possible, and therefore create the cash at a Holdco level to get ready for the payment of that $1 billion bond.
Okay. Now you talk about, you know, foreign currency debt. Can you speak to what the mix is between foreign currency and local currency debt in your book, the percentage mix?
Yeah. The percentage mix will be around 50% . I would say around, in the range of 50%-55%, currently. That is also to some extent driven by the current situation in Nigeria, where we had to take some dollar debt to pay off the vendors. Because we can't stop investing in Nigeria being our largest, you know, market. Therefore, you see a little bit of increase in the dollar debt to pay off some of the vendors.
However, on a steady state, once the situation normalizes, I'm pretty sure that this will further come down and it will be more towards, you know, I would say 70%-80% local currency and maybe 20%-25% foreign currency debt. That's the ultimate objective. Also as I mentioned, the objective is not to keep any debt at a Holdco level because it's extremely tax inefficient because we don't get any tax shield on the interest cost which we bear. That's the whole objective.
Okay. The final question is on rating, your credit rating. As a company you don't seem to have a credit rating. Where are you on this? Any plans on that way?
No. At this moment we don't need a credit rating. Obviously, we can do a credit rating when we need to go in the market to borrow a large part of the fund. At this moment we don't require it. We have not, you know, gone ahead and done anything on that front.
Thank you. That was the last question for today. I would like to hand back to Segun for any closing comments. Please go ahead, sir.
just like to say thank you to everyone, and I look forward to discussing our full year results in a couple of months. Thank you.
Thank you very much.
Ladies and gentlemen, that concludes this conference. Thank you for joining us. You may now disconnect your lines.