Earnings Call: Q2 2021

Oct 23, 2020

Before we continue, I will present an important disclaimer. This presentation has been prepared by Airtel Africa plc and is for information purposes only. This presentation contains forward looking statements, which by their very nature involve inherent risks and uncertainties, and risks exist that such forward looking statements will not be achieved. You are strongly advised to review the disclaimer page of the investor presentation available at etail.africainvestors. This conference call will be recorded and the transcript will be posted on the website. The first speaker will be Mr. Raghunath Mandava. Please go ahead, sir. Good morning, and thank you for joining the call. Today, we have announced our H1 results. I will take you through the business areas and Jayarif will cover the numbers in more detail. H1 twenty twenty one results are a clear evidence of our strategy delivering profitable growth. Our revenue grew by 16.4% in constant currency with EBITDA growing even faster. Thereby we delivered a margin expansion of 110 basis points in constant currency terms. We delivered 13% revenue growth in Q1 which expanded to 19.6% growth in Q2 in constant currency. Revenue growth was broad based across all services, voice, data and mobile money. Our EPS for pre exceptional items restated amounted to $03 Finally, we continue to improve our cash position with FCF at a level of $319,000,000 up 52% largely driven by the growth in EBITDA. We keep our aspirations announced at IPO and we continue to make good progress this year. In the first half this year, we grew mobile revenue by 15.3% and mobile money revenue by 30.4% and increased the underlying EBITDA by 110 basis points to 44.7%. Moreover, we keep our CapEx broadly stable in H1 twenty twenty one at $216,000,000 and we decreased our leverage to 2.2x. CapEx in first half was slightly below that of last year due to the lockdown effects, but the full year outlook remains the same at six fifty million to $700,000,000 The Board has declared an interim dividend of 1.5¢ in line with our new progressive dividend policy which Jaydeep will talk about it a little later. This slide sets the stage as to how our strategy delivers. As mentioned before, unlike anywhere else in the world, we in Africa have an opportunity to deliver growth across voice, data and mobile money. Unique customer penetration at about 46% means there is an ample scope for customer growth and we have been growing customers in double digits. The customer growth for this half year was 12%. Voice ARPU dropped slightly due to interconnect rate reduction in some countries, but overall voice revenue grew 7%. Data growth of 33.4% is coming from a 24% growth in customers and a 10% growth in ARPU. Current smartphone penetration is thirty three point two percent and four gs penetration among the smartphones is at about 30%. This is an important parameter for continuous growth of data. Airtel Money grew by 30.4% as we expanded our service portfolio to more customers, resulting in customer base growing by about 30%. The ARPU growth has only been 2.4% due to a lot of free giveaways that we had done during the pandemic period. Data and mobile money, the growth engines, now account for 3010% of our revenues. That means 40% of our revenues is actually growing at about 30% plus and driving growth along with voice, which is also in good mid single digits. This is a clear demonstration that the countries we operate there is growth in voice data and mobile money resulting in both customer and ARPU growth. Let us now move to the regions. Nigeria, our largest market continues to deliver a very strong growth thanks to the continued expansion of network and distribution infrastructure. East Africa was the fastest growing region in this period. Five out of six countries are growing more than 20%. Our revenue increased 21.9% and EBITDA growth of 35.1% year on year. The Francophone Africa has turned around. The performance continues to be improved largely driven by growth in data and mobile money while it's been partially offset by voice. J. D. Will take you in detail through the segment performance. COVID-nineteen, these results that you have seen for the first half clearly show the resilience of our business and the effectiveness of our strategy as well as recognizing most importantly the fact that the services we provide are essential to customers and economies. In these unprecedented times, the telecom industry has emerged as a key and essential service in these countries allowing customers to work remotely, reduce their travel, keep them connected and allow access to affordable entertainment. Mobile has become an affordable alternative for travel and communication during this difficult time of pandemic. In the first half, we delivered a strong set of results and as lockdown restrictions eased during Q2, our performance continued to improve with constant currency growth of 19.6%, up from a 13% growth that we presented to you all for Q1. We remain alert to the potential for further disruptions from a second wave of COVID-nineteen across Africa and the associated actions by governments to minimize this contagion. Nevertheless, we are in a strong financial position to capture the growth opportunities presented by promising underlying macroeconomic and demographic trends in a fast growing region that is vastly under penetrated in terms of mobile and banking services. Moreover, we recognized a progression of Q2 versus Q1 when the pandemic started. We remain confident of delivering long term sustained growth for our shareholders. Let me now move on to the strategic part of what we've been doing. You would have seen our key pillars of strategy. Just to remind you, it's about winning with the network, winning with customers, winning with data, win with mobile money and then win with cost and win with people. There are further areas of upside and our philosophy that we are providing essential services and hence partnering the nation help create a good platform for our business growth. Our strategy is to continue to grow network while becoming a leading four gs player. 87% of our sites are now on single RAN technology, which means that you can upgrade from two gs to three gs to four gs with a software switch. This along with our fiber investments that we have put in with an East West connectivity enable us to generate huge incremental capacities at very low marginal cost. We added more than 2,300 sites and now 70% of our sites are on four gs with three countries almost at one hundred percent four gs level. Our total fiber is 44,000 kilometers across our footprint with connectivity between East And West Coast Of Africa. This has resulted in us having a network that we can allocate greater number of carriers on spectrum to data and specifically to four gs through software upgrades, resulting in creating sufficient headroom for further accelerated growth, thereby be the preferred smartphone network in Africa. Not only we have enough headroom in our current capacity, but also the flexibility through software upgrade to add more carriers and more capacity in our network. Win with customers. In H1 twenty twenty one, we continued the accelerated customer acquisition through our exclusive and dedicated distribution channels. Our customer base has reached 116,000,000, which is a 12% growth year on year. We also continued expanding our distribution network with a strong focus on both recharge and SIM card availability, especially in the rural areas. This has benefited us a lot during the pandemic when lockdowns and mobility got restricted. These along with the simple offerings helps us to increase usage per customer. Win with data, you will notice from the above table that data customers are growing at about 24% with an ARPU growth of about 10%. This has helped us grow the revenue at 33. You will notice that the four gs contribution has grown to 30%, thus helping our average data ARPU from $2.3 per customer to $2.5 per customer. This growth of ARPU has come from a 57% increase in data usage per customer. So a 10% ARPU growth with a 57% usage in customers. This is why I was explaining to you about the huge incremental capacities that we are capable of building and adding more. Our data consumption has grown to 90% fueled by usage of higher value bundles and home broadband. As you would be aware, we have spoken about that we have launched in a big way wireless home broadband and this is adding up big high value customers and high value consumption. Four gs customers have contributed to only 10% of the overall base, but over 50% of the overall data consumed. Winning with mobile money. Mobile money is a strong growth opportunity we have in Africa, in the Sub Saharan Africa in especially. We continue to make good progress on this. If you exclude Nigeria, where we do not have a payments bank license yet, our customer penetration is close to 28%, up from 24% last year. This growth has been driven through availability of assured float, distribution expansion, increase in new use cases and through adding new partnerships and expanding the merchant ecosystem. Most recently we have added new alliances with partners like Standard Chartered, MoneyGram, WorldRemit and Bokuru. These are in addition to those signed earlier with Mastercard, Western Union, Ecobank and others. At the end of Q2, we have over 20,000,000 EthelMoney customers representing 30% increase versus last year. The average annualized transaction value now stands at $47,000,000,000 What's been this consistent and simple strategy for growth? Before I close and give the floor to J. D, let me make a short summary. This simple strategy with strong on ground execution and a huge data network, intend to grow mobile revenue ahead of the industry and in line with our vision of bridging the digital divide in Africa. Our vision is to make Atom Money the currency of choice and drive financial inclusion in the countries we operate. We continue to work on our asset monetization, which would provide us additional cash inflows. Additionally, there is a potential upside from our fixed wireless home broadband business which has started kicking in and the enterprise business. Our operating model helps us to continue benefiting from the operating leverage and the effect of scale supported by the network we are building. Thank you. I now hand over to Zaidim. Thank you, Raghur, and good morning, everyone. I will take you through our financial performance for the year ended thirtieth September twenty twenty. As you have seen in Raghu's presentation, we have delivered another very, very encouraging set of results. Our constant currency revenue grew 16.4% in H1 twenty twenty one. However, Q2 twenty twenty one growth accelerated to 19.6%. These results are stronger even in the context of first wave of COVID-nineteen impact in Q1, where we have seen a drop in the growth rate due to severe lockdown in the initial period. Absolute EBITDA for H1 twenty twenty one amounting to $812,000,000 an increase of over 19% and EBITDA margin stands at 44.7%, margin expansion of 110 basis points. Leverage during this period was down to 2.2 times compared to September and broadly stable compared with March 2020. Free cash flow continued to be strong at $319,000,000 up by about 52%. EPS before exceptional item was $03 down by twenty percent, mainly due to recognition of derivative gain of $46,000,000 in the previous period that was H1 'twenty. Excluding onetime derivative gain, restated EPS actually grew by 19%. As mentioned by Dhobu, Board has declared an interim dividend of $0.15 in line with our new progressive dividend policy. Our reported revenue was up by 10.7%, while constant currency growth was 16.4% due to unfavorable foreign exchange movement in certain countries. Growth was recorded across all three key services. Voice revenue grew by over 7%, data revenue by 33%, and Airtel revenue grew by over 30%. Coming to our three regional performance. First, Nigeria. Customer base grew by over 11%. Revenue grew by 20% on year on year basis in constant currency. Revenue growth was driven by double digit growth in both voice and data. Our continuous investment in network, especially densification of four gs network, resulted in data usage increase and data revenue growth. EBITDA at $386,000,000 with a margin of almost 54% in reported currency. Margin has been expanded by 60 basis points. Operating free cash flow remained healthy at $289,000,000 up by about 42.6%. Coming to East Africa. East Africa was our fastest growing region in the first half of this year, with revenue growth of almost 22% on year on year basis constant currency year on year basis in constant currency and customer growth of 14%. Growth was consistent across all services, and five out of six markets have grown at 20% plus. Mobile money continues to be a key driver of growth in most of the East African markets, grown by over 40%. Data revenue, mobile money, both together now contribute to 46% of East Africa total revenue. EBITDA at $292,000,000 with a margin of 44.3% in reported currency. Margin has been expanded by four thirty one basis point in constant currency. Operating free cash flow at $211,000,000 up by 35%. Coming to Francophone Africa. Our performance in Francophone Africa continued to improve. Customer base grew by almost 9% and revenue grew by 4.4% in constant currency for the first half and 6.4% in Q2 'twenty one. Revenue growth of data and mobile money was partially offset by a decline in voice revenue. Data revenue grew by almost 30% and mobile money grew by 12.5%. EBITDA at $146,000,000 with a margin of almost 33% in reported currency. However, there was a $6,000,000 1 time indirect tax settlement impact impacted the francophone EBITDA, underlying EBITDA. Operating free cash flow at $110,000,000 up by 54%. Mobile Money continued to deliver a very strong growth, as you can see. Mobile Money business now serves over 1,000,000,000 Mobile Money customers, representing over 70% of our total customer base and almost 28% if we exclude Nigeria. Customer base grew by almost 30%, was largely driven by further strengthening of our exclusive distribution network. Revenue grew by 30% in constant currency driven by customer growth and growth in transaction value. Underlying EBITDA increased by 31%, amounting to $88,000,000 driven by revenue growth. Underlying EBITDA margin at 48.6%, an improvement of 21 basis points in constant currency. Moving to EBITDA. H1 'twenty one EBITDA amounting to $812,000,000 up by 12.9% in reported currency and 19.3% in constant currency. The EBITDA growth was driven by revenue growth of 16.4 and efficiency in operating expenses. Reported EBITDA margin was 44.7%, an improvement of 85 basis point and 110 basis point in constant currency. Adverse ForEx impact of $39,000,000 has contributed mainly in Nigeria and Zambia, has offset some increase in the underlying EBITDA. In H1 'twenty one, we kept deleveraging, achieving a net debt to EBITDA ratio of 2.2 times. Our priority remains to invest in growth and at the same time continue to bring down the leverage ratio. CapEx for the first half of the year was $216,000,000 slightly below last year, largely due to logistic issues as a result of lockdown restrictions in the first half of the year in certain countries. However, our full year guidance for CapEx remains unchanged between $650,000,000 to $700,000,000 with a focus to expand and strengthen our network. Over the last few years, we have consistently deleveraged from nearly 9x in FY 'seventeen to 2.2x now. The management and Board are committed to continue deleverage our balance sheet and we have now a target net debt to EBITDA ratio below 2x in the medium term. As you have heard from Raghu that the Board has approved a new progressive dividend policy. The new policy will allow the business to further focus on our growth opportunities while at the same time deleveraging faster. It will also provide more sustainable and predictable dividend to our shareholders. With this revised policy, our aim is to pay a full year base dividend of $04 per year with a mid to single high digit progressive increase every year. The Board will reassess the dividend policy once our leverage profile will be below 2x. For H1, the Board declared an interim dividend of $0.15 per share and following The U. K. Generally accepted practice of having a higher final dividend. Free cash flow was $319,000,000 up by 52%, largely due to the higher underlying EBITDA, about $5,000,000 of reduced interest payment as a result of lower debt, 31,000,000 of lower tangible CapEx, dollars 30,000,000 benefit in the working capital, largely due to higher payment to the creditors in the previous year, partially offset by an increase of 49,000,000 in cash tax as a result of higher operating profit. Coming to the leverage. Over the last few years, we have consistently deleveraged and closed first half of the year with a net debt to EBITDA ratio of 2.2 times, broadly in line with our recent trends. Our foreign currency debt has slightly decreased, and in the medium term, we aim at reducing it further by pushing more debt down to the opcos and use of proceeds from the possible asset monetization to repay the market debt. Earnings per share before exceptional item last year, EPS of $0.37 had one time benefit from recognition of derivative gain of $46,000,000 Excluding one time gain, our restated EPS grew by 19% from $0.25 to $03 Higher operating profit was partially offset by higher tax charge on account of higher operating profit and dividend distribution tax. However, effective tax rate was 47%, broadly in line with our previous period. So in summary, just to summarize H1. Despite COVID-nineteen impact in Q1 twenty twenty one, we delivered encouraging set of results with good performance against all metrics. We continue to deliver double digit revenue growth with all services, voice, data, and mobile money contributing to the growth. EBITDA grew even faster. We expanded our EBITDA margin by 110 basis points in constant currency during H1 twenty twenty one, strong cash generation during the period. We continue to deleverage and reached a leverage ratio of 2.2 times. Our outlook in medium term remains unchanged as we continue growth momentum. As you are aware that Airtel Africa that Africa lacked the spread of COVID nineteen during the first wave. Based on our experience during the first wave of pandemic, relevant risk mitigation plans are already in place to take care of the any possible second wave. Thank you. Now I will hand over to the moderator for question and answer. Our first question is from Filippo Serrasi of Goldman Sachs. Hi. This is actually Faiza Lovnik from Goldman Sachs. So congratulations on the strong set of results this morning, and thank you for the opportunity to ask questions. So three questions on my side, if you don't mind. Firstly, if you can provide us with an update on cash repatriation across the footprint, particularly in Nigeria and how that impacts or or the thought process around dividend distribution at the at the group level and and and refinancing. And the second question is, are any of the regulators urging you to list any of the underlying subsidiaries? And my third would be on on the tower sales program. I would appreciate any an update on where we are. And if you can provide some color there, that would be quite helpful. Thank you. Okay. So on cash repatriation, we all until about March, we didn't have any issue in upstreaming cash from Nigeria. Since March, of course, the liquidity has tightened as a result of the impact of low oil price in Nigeria. And and, obviously, the impact on on the availability is because of the foreign currency reserve. It's too early to say how long this liquidity tightening will last. Our experience says that in the past, this was temporary for a few quarters. However, with the crude price stabilizing at around $40 and stable forex reserve, we expect the foreign currency availability stabilizing probably in the coming quarters. It's difficult to say when, but we expect it will start moving up as we progress during the year. In some other country, we have a little slowdown in Malawi. That is another country where but the dollars are available, but it is available in in shorter value. But rest of the other places, there is absolutely no issue. Coming to the second one, listing of subsidiary. Currently, there is no other regulatory requirement of listing anywhere. If we if we come to know about any any other requirement, is which is coming up in future, we'll let you know. On the tower cell, we have actively persuading tower cell possibility in five countries. But currently, there is nothing to be disclosed because it's at the initial stage of discussion. So when something gets materialized, we will definitely let you know in appropriate time. All right. Thank you. Our next question is from Dilya Ibrahimovova of Citi. Hi. Thank you very much for the opportunity to ask questions, and congratulations on the strong results. I had a few questions, if I may. First is on maybe just following up on your on the repatriation question. How many, of course, do you expect to pay dividends maybe based on the dividend that has been announced by or based on the decisions that have been in by the operating companies to pay dividend, not how many has paid or have paid already, but how many you expect to pay? That'd be great. The second is on Tanzania. If you could give some color on the team registration and the I think there is a double registration there for the impact you have seen so far, whether you have gained share on the back of this, whether you have been able maybe to keep customers using your team on the back of your of the pricing that you offer. Yeah. It seems like the East Africa has not been or the growth in Tanzania has not been affected by some regulation at all. So if you can follow there, it would be really appreciated. And my last question is, again, on Tanzania, this this maybe if you could explain a bit, if you could, on the on the impact the resolution with the government would have on potential tower sale. Is it the tower of is the tower fully owned by the entities where you share ownership with with the government? Or are there any any share payables that are there that may affect or maybe some kind of losses that may affect your proceeds if and when the tower sale would materialize? Thanks. Okay. To answer the first question, how many countries pay dividend? Obviously, we don't give country wise detail, but roughly slightly above half of our operating units are dividend paying companies. Mhmm. Slightly above half. Yep. Mhmm. So we'll we have 14 units. So roughly about seven seven, eight units are dividend paying units. I request to Rahul to talk about the SIM registration. But before that on Tanzania, I can tell you that as per the settlement agreement, the government has passed the legislation for removing the requirement of tower company listing. And after that, we have progressed quite well with couple of tower tower companies to see if we can sell the towers. Currently, the towers are owned by Airtel Tanzania. So all the towers, about 1,500 odd towers are owned by Airtel Tanzania. Of course, we have taken towers on some of the tower companies. That's different. So this 1,500 odd towers, are looking at selling off the towers to a tower company. And as I said in the beginning that we will let you know when it materializes and and to what will be the extent of, you know, money which will be repatriated to to the majority shareholder or whatever what will be the distribution mechanism. Those will be communicated as the tower sale gets materialized. I request Raghu to address the second question, please. This is on SIM registration and the increased KYC norms of the Tanzanian government. Over phases, have a national ID card and we have been correcting our customer base. So we are in the last couple of million customers only and which needs to be corrected. So I think we are quite compliant to the whole thing. And as I would have explained before, please appreciate that most of these markets are a dual SIM nature. Even if a couple of 4%, five % don't finally register, they will be on one provider of the other. Overall revenues of the industry do not get impacted much. We've seen that in Malawi when we had to block off 25% customers, the revenue dropped only by about 4% and which came back in less than two months. So I think we are on course on the same registration and KYC. Over 14 countries, this improved KYC norms has been coming country after country. And by now, we are a reasonably well oiled machinery, which knows how to manage this. The teams are able to handle them quite well. Thank you. Thank you. Our next question is from John Kim of UBS. John, your line is live. Since we have no response from that line, our next question is from Sunil Rajkopal of HSBC. Good morning, everyone. Thank you for the opportunity for asking question. I have two questions. Firstly, on the dividends. So what has been the change in management thinking with regarding to the revised dividends? And what I mean, what has led to the change from keeping the FCF as a base for dividends versus the base of 4¢ currently? And secondly, what are you seeing in terms of trends in Kenya, and what are the options there? And if I can just add one more question to the line, what what is the progress that you have seen in terms of PDS licenses in Nigeria, and what what should we be expecting of any changes that might be happening there? Thank you. Raghu, would you like to take the question, or I will give you yes. So I'll address the first question, then I'll hand over to Raghu. So on the dividend side, as you have seen from today's result that business continues to execute well at delivering strong growth across its markets. We continue to see significant value creation and investment opportunities within the group. We have consistently deleveraged over the last few years and ended the half with a leverage ratio of 2.2. Our aim is now to deleverage faster to get it down below two. Given the significant opportunities to invest in future growth and the aim to continue to reduce leverage, the Board has taken a decision to rebase the dividend at $04 for $20.21 and adopt a progressive dividend policy, which aims at growing the dividend mid to high single digit every year from the rebased level, which is $04 This new policy will not only allow for a faster deleverage, but also provide shareholders with a certainty over certain level of dividend. Having said so, once we go down below two in terms of the leverage ratio, Board can always reassess the dividend policy and and decide accordingly. But the fundamentally, the objective is to, a, to continue deleverage, bring it down below two, at the same time, in the business. And also the third and not the last point, but the but the point is that there is a certainty of dividend or return to the shareholder. So two and three, you can take. You asked us about I was not very clear on the Kenya part. So first, let me ask the Nigeria part. The Nigeria, we are due for a license renewal next year, and we think it's a procedural issue with the payments that are already fixed for all the licenses and the payment payouts. So that should not be an issue. The second issue on the payments bank license, as we told before that the government has asked mobile operators to apply late twenty eighteen. Four of us have applied to both us and the leading players have not got our license, and we are still waiting. The only the positive thing is we have not been rejected, so we are waiting for the governor to be positive and clear it at the earliest. However, I have no indication of time. On Kenya, we have called off the merger with Telecom Kenya because of undue delays, and it was hurting our investments. So we have gone alone now, and we are starting investments in a big way and expanding our network so as to continue to gain in Kenya. We've been performing quite well in Kenya, and I think with these new network additions, we will be able to take the next leap. Sure. I hope that answers. If I yeah. Thank you very much. So if I can just follow-up with maybe just one more question there. So so so should should so should the investors be thinking about the indications on the dividends if that is any indication of the CapEx that that is likely to go into the business next year? So because we you've seen some of the operators cutting pulling back the CapEx this year and potentially moving some of it for next year. So is is that is is there an indication on what would be the investment levels for next year? And, yeah, that that would be it. Thanks. See, if you really look at our the way we've been doing, we've been modernizing our network and seven 80% plus of our network is single RAM. So now our next level of focus has been to continue to expand our network coverage and also to get better transmission capacities and fiber capacities on data. So as we told you before that the first half was marginally below that of last year, we continue to hold our estimates at $650,000,000 to $700,000,000 on CapEx for this year and so will we spend the same as next year. Africa has been relatively less impacted and as you see, the business results are also in line with our expectations and growth. Telecom is lot more essential now than ever before And I think it is very important that we continue to invest so as to serve the needs of our growing customer base. Sure. Thank you. Thank you very much. Our next question is from Evgeny Aninkov of Balsa. America. I have two questions, please, and thank you for the presentation. First one is on your East Africa margins. Could you please give more color on improvement, which possibly exactly cost cuts you've done in the last quarter? And could it be sustainable in next quarters with margin progression? And secondly, could you please update us on your effective tax rate guidance? You. David, I'll take the first and hand over the second to you. Flow through of 50% plus EBITDA margins, you will continue to see EBITDA growth happening as long as revenue growth happens handsomely. East Africa has grown well above the 20 mark and with this sort of revenue growth and with cost not changing with 50% plus flow through of the EBITDA margin flow through on incremental revenues, you are able to see this growth. If we can sustain this growth, we will be able to grow our EBITDA. The second thing that we will have to note about East Africa being at about 45% EBITDA now is that East Africa has some of our weaker market share countries, like Tanzania, Kenya and Rwanda, while we have a strong market share countries like Uganda, Zambia and Malawi. So the mix, our EBITDA mixture is more is a mixture of these higher EBITDA margin countries and the slightly lower EBITDA margin countries. This also means that when the lower EBITDA margin start picking up revenues, the flow through is much better, and we are able to see that flow through coming into East Africa. Okay. On effective tax rate, as we have seen from the result that H1 twenty one effective ETR was 47%, which is slightly lower than the last year FY 2020 effective tax rate of 49%. Decrease is due to the profit mix change as well as amongst the operating entities. The mix of profit got changed. We expect to maintain a very similar level of effective tax rate throughout the financial this financial year. So that 47% is is, by and large, will remain at the same level for the full year. Thank you so much. Our next question is from Alastair Jones of New Street Research. Yes. Hi. I've got three questions, if you don't mind. Just firstly, I'd be interested to hear the outlook for mobile money. I mean, more interesting just to understand what customer behavior or how that's changing post COVID. If I look at your transaction value, that's sort of growing about 25% year over year for last few quarters, and then it's grown about 56% in this quarter. So clearly, that's positive and there's momentum there. It would be interesting just to see what you're seeing in terms of the customer usage of the mobile money and how that's changing in the current environment. The second one, just following up on the Nigerian license question from earlier, you sort of mentioned that it would be a I think it's sort of a fixed fee for all the licenses. Is that how it works? I mean, is it the same price as it was for the last time? Because I know there's access to the spectrum, but then there's also the license to use the spectrum. I think they're two different things. So I'm just trying to understand exactly how we should think about the risk around that. And then finally, you mentioned interestingly that you sort of put various plans in place to try and mitigate against the risk of a second wave and try and sort of minimize the impact that it would have on your business. I'd be interested to sort of understand an example of how you've changed the business to try and sort of minimize that risk if there is a second wave that develops in these countries. Thank you. Thank you. First, let me answer the mobile money question, and I'll request JD to help on the Nigeria license. He's lot more experienced in Nigeria on the amounts, and I'll answer the first question of mobile money and the second wave of pandemic part of it. Firstly, on mobile money usage, The biggest reason why people use mobile money is also because the banking penetration is not very high in Africa. And more than bank penetration, the available of banking infrastructure is much lower. That means people will have to travel longer distances to reach a bank branch. What we have done through mobile money is a series of our agents, kiosks and our own branches, mobile money branches, we've been able to establish a wide reaching network. Because of this, and because of the mobility restrictions during the pandemic, people have been able to use a lot more of mobile money. As you rightly said, 56% jump in transaction values have gone really very well. The revenue did not flow through to that extent because we did do some free giveaways and free p two p and other measures during the pandemic in order to help our customers in discussions with our governments. So mobile money will continue to be grow. This is the current pandemic has actually given it a big boost or an impetus to the whole accelerated the whole into mobile money. So what do people use for mobile money? Largely, understand when you do not have a banking system, the basic service of banking is withdrawing money and spending somewhere or depositing money for safety purpose. So once people travel from one place to the other, they would rather put money, rental money, travel to the next place and then withdraw it. Or they send when a person or migrant person working in a big city like Kampala or Lusaka sends money to his family in a village, they use mobile money. So large amount of our transactions are cash in cash out, followed by P2P transfer. The next third thing that comes in mobile money is a big one about payment of services. It's so well integrated that even me, people like me, we use mobile money to pay our electricity bills and everything else because you don't have to travel there. Mobile money comes in benefit wherever the distances between the customer and the way you spend is remote spending, more than on level spending. The last one comes into the merchant ecosystem. How are we growing it? As I spoke to you, there is a lot of money flowing, international money transfers, which are coming now on mobile money for people in deep rural also will be able to get it directly on mobile money and growth. So series of measures are being taken to further accelerate mobile money growth. And surely the pandemic has given an impetus because people are more scared of handling cash, more worried about traveling, and hence the remote movement of mobile funds and funds was happening lot more. The third one, the question was on the second wave of pandemic. You know, in a telecom Yes. Yes, Yeah. In a telecom business like us, what are we trying to do? When people cannot travel, when cannot move, they need to consume or they need to communicate over a telly distance. That means keeping up our networks up has to be the most important priority for us. In spite of our lockdowns, the amount of preparedness before the lockdowns that our teams took have been remarkable. We've stocked up greater fuel in each site. We've ensured that spare parts are available. We've worked very hard in order to keep our network up. Actually, network uptimes have been the highest ever in our record even during this pandemic period, at well above 99.6% in across and in some countries even higher. The second thing that we've done is what a customer let me just visualize a customer who is living in a village or a small off place. If they need to do a recharge buying in the morning, and most of them do daily recharges, they need to go to a nearest shop. The minute there is an Airtel money penetration happens, they can recharge themselves. Or they need to have a stock recharge availability very close to their houses. The spread of recharge availability and the growth of recharge availability, especially in rural, through a very different distribution mechanism that we started building. We started building it about a year and this really helped us during the pandemic in accelerating our growth through our Airtel Money branches across and also our rural distribution enhancement. So between distribution and this, this has happened. So this is how we think keeping our network up as a service to the people is our primary role. And I think that is the way we are going to prepare to keep our networks. That's fine. I'll hand it over to Jaydeep. Okay. So on Nigeria license, that Nigeria license is falling due sometime late next year, I think around November, December. The discussion has not yet started in terms of what what will be the fees, etcetera. But I can give you the historical. Historical, it was roughly about $285,000,000 to 300,000,000 for fifteen year license. So that was the historical data point. That comes with certain quantity of 900 megahertz, 1,802,100. And we have also taken additional spectrum, but that is over and above this. That is falling due very recently. We have taken for ten years, twenty six hundred megahertz for 20 megahertz for ten years. So that comes separately. That will fall due after ten years. We have taken only last year. But the basic license renewal, that will be in the past, it was renewed at about $285,000,000 roughly. That's that's falling due sometime in next late next year. That's very helpful. Thank you. We have a follow-up question from Delia Bhagimova of Citi. Hi. Thanks very much for for the opportunity to to ask for our questions. I just had a a couple, please. Could you do you mind for well, you mentioned in the release that in Nigeria, there has been a benefit of some bad debt reversal. If you could quantify that, that'd be very helpful. Second question is also on mobile money in East Africa. If you could give us some color how transaction mix changes and maybe how many of what's the share of transactions are related to the airtime top ups and or maybe airtime top ups that are being electronically or even electronically via mobile money. That'd be also very helpful? Thank you. Okay. Nigeria bad debt is very insignificant. It's not a very significant amount. It's roughly about $2,000,000. So during pandemic, some of the payments got delayed, so we had to take the provision, and that has got reversed. So that's not a very significant number. Mobile money, if you see our overall, as I explained before, the mobile money use cases has always been on customer using for cash and others and also for recharging. So as mobile money penetration grew up and grew in East Africa, we are also seeing a positive impact on our mobile revenues, because a customer is able to recharge early morning instead of going to a shop whenever he or she can go. So almost now about in the key countries that we are able to see almost 30% to 40% of our recharges has started moving towards the mobile money route. And this not only gives us an advantage on our cost, but also on increased consumption by our customers. There has also been an increased usage because of the free P2P that we have run, a very big jump in our P2P consumption, which is continuing to grow and the overall transaction values are up. Thank you. I hope that answered, ma'am. Yes, thank you very much. Thank you. We have a follow-up question from John Kim of UBS. John, please note that we cannot hear you. Make sure that your phone is unmuted. Hi. Can you hear me now? I lost you earlier. Yes. Sorry. Can hear you. Okay. I'll make it quick. Great. Great. I'll make it quick. On the OpCo leverage, what does your ability to lever at the Nigerian OpCo level? Or put slightly differently, if the FX restrictions exist for a period of time, call it six to twelve months, what are your options to try and mitigate your exposure to that opco from a corporate cash flow perspective? Second question, on Mobile Money, given the strength of the growth, is it mostly driven by growth in the distribution? Is it increased customer usage? And what sort of concessions are you having to give away on the transactions? So are you having to give away similar sort of concessions like Mpezza in Kenya? And how prevalent is that in the footprint? Last question, francophone margins, where do you look for those to stabilize and how soon? Thanks so much. J. D. If you can answer the first one, then I'll handle the others. Yes. With specific to Nigeria, if I understand the question, you are asking whether what is Nigeria leverage, right? That's is that the question? Sorry, I Sure. So my understanding is you are having cash flow issues out of Nigeria, very similar to other corporates. A broad based question, what is your what is your ability to, mitigate that? So if oil is weak and you don't you're not able to get dollar liquidity for the next twelve months, are there certain measures or hedges you can put into place? When we look at other operators like MTN, they did lever at the OpCo, taking NIRA debts to try and mismatch minimize the mismatch between dollar and local currency cash flows. I'm wondering how you're thinking about the same sort of set of problems. Thanks. Yes. Okay, okay, okay. So to answer your question, first of all, Nigeria, before this quarter, didn't have any debt other than finance lease obligation. And finance lease obligation of Nigeria is also payable in local currency, but it is marked to a fixed or rather spot rate kind of a thing. So it is payable in naira, it is not payable in dollar. So even though we say that finance lease obligation is in dollar, but this is payable in local currency, converted into a spot rate or a fixed rate depending on the contract. To answer your second question, Nigeria didn't have any debt before this. We have taken a small debt there to pay off our dollar denominated vendors, especially the CapEx vendors. We are now actively considering and discussing with some of the vendors for the extended credit so that we can get a twelve to eighteen months kind of credit to get over this situation. And of course, we have local naira currency kept into various banks as a fixed deposit because there is currently the availability of dollar is a question mark. So these are the few steps which we have taken, and we are also trying to see some other opportunities of with in constant discussion with the bankers to see if there are some other opportunities exist to do some kind of a upstreaming possibility in the coming months. Let me address the two parts. First is on mobile money. What are we seeing? Actually, most of the free giveaways like some of the countries did is largely during the early part of the year, that is during the March, April versus June. Slowly, we've started charging the P2P because of other issues. So it is coming back. But nevertheless, if you really look at it, our customer growth is 30%, our transaction growth is about 57%. That means there is a broadly 2020%, twenty seven % growth in transaction per customer. This is happening because most of them are staying at home, even the existing customers and are preferring to transact. And there is some incremental transactions we are picking from international money transfer and some merchant and payments and service payments. The second thing that we are talking about is distribution is a very critical part for end to making sure that mobile money is at as they say an arm's length. So as to get more and more customers be able to access mobile money. And so you would see a part of our revenues, if you see a 33% growth is coming from roughly a 30% customer growth. The revenue growth, the ARPU growth has not been more than 2%, three %, because of the free giveaways, but our transaction growth has been per customer at about 24%, twenty five %. So this is how it is growing. Now let me come to the second question of francophone margins. In telecoms, the margins are at up, say for Africa is at 45%. However, our operating profit is at about 28 because of the high fixed assets that we need to put on in an industry like ours. So you will need to run a business at about 40 five-fifty percent margin to even get a 25% operating profit, 20 five-thirty percent operating profit. If we are today at 45%, you will see that Nigeria is at 50%. If you see the East Africa margins at 45%, there are few countries, well countries above 50%. In my belief that we should start moving correcting one country after the other, that's been our journey in the last four years, that country after country we started improving and correcting, and started moving them towards the 45%, fifty % EBITDA margin mark. We've done that to quite a few countries. And at some point of time, even in Francophone Africa, we have a couple of countries there, but we have some countries which are low. Like in East Africa, there is a mix of weaker and stronger countries, you have the same in Francophone. Perhaps the second part is, as the revenue starts growing and the incremental EBITDA margins are well around 50 odd percent, we should start seeing an EBITDA growth jump, initially bigger and then slower. I think this is what is my expectation. If you really ask me, I think in Africa, of the high fixed assets that we are investing, we should start aspiring for a 45% to 50% EBITDA margins across. How and when we'll get there is an execution challenge for us. Okay, great. Thanks so much. Thank you. We will now take questions from the webcast. We keep asking lots of questions from the webcast. Most of them already been answered. I think there are a couple that were at attention. One is across Nigeria and more significant countries elsewhere, do you see you're gaining market share from smaller players or from your direct to bigger competitors? Good question, but I don't really worry about it. See, the the big key thing in a telecom industry is that we're an essential service with 45% unique customer penetration. Of these 45%, thirty odd percent have a mobile, the smartphone enhanced data usage. Mobile money penetration even excluding Nigeria is 30%. There is a huge market for us to grow. Obviously, we've been growing and exploiting this opportunity by serving these customers who have been unserved till now. As you would see these numbers, and some of you will have access to the numbers of the industry as much as I do, you would see that we are perhaps growing faster than some of the countries in quite a few countries faster ahead of the industry. So some in some places, are growing ahead of both the smaller or significant players and also some of the direct competition. Thank you. Thank you, Raghu. And from Salome, UBS. A question on Francophone Africa. So Francophone regions looks to be lagging the group performance. Could you please give us an idea on which countries in the regions are performing well? And what is the overall strategy in the region? Is there any potential to exit some non performing markets? We don't get into country wise details at this stage. But nevertheless, if you see Francophone Africa, about four quarters back, we were at minus 2%, minus 3% revenue growth. And I was explaining that we have delayed our four gs investments and as four gs investments come in, we will start seeing the growth. Today, you are able to see 4% and even in quarter two, almost a 6% revenue growth. Mind you, the advantage of Francophone Africa while it contributes 24% of our revenues is also that this is largely hard currencies, the CEFA Central African Franc, the West African Franc and the dollar of DRC are very hard currencies. So you have an advantage there in terms of the currencies that we are holding. So into some extent, I would also expect a slightly lower growth in reported in constant currency terms here. However, we started seeing this growth rate happen and some of the countries have started hitting double digit growth. Some of our francophone countries have struggled a bit and it's our problem that we are trying to fix this issue, where some of them are deeply landlocked and huge countries. Chad, Niger, Gabon, they are huge land geographies and hence the ability of fiber and transmission penetration from the coast is a little difficult task. So you will see the kicking of data growth is coming a little later than what you would have seen in the East Africa and the Nigerian markets. So I think it's more of a timing issue and really not of concern. And I'm sure the teams are our teams are focusing on executing our strategy in order to ensure that growth. Thank you. Thank you, Raghu. And probably the last one is, Jadip, if you could give an overview of the effective interest rate on the debt as well as why what is this the reason for the slight increase of net debt? Sure. Just give me a second. Okay. So interest overview of the interest cost, if I have to give you a little details on the interest cost. So weighted average interest rate remains at 4.8%, and that's that's flat on the debt part of it. Of course, there is the devaluation impact, which has hit us in H1, and that's actually clubbed under the finance cost. And that's roughly impact if you see the swing between last year to this year, the swing is about $44,000,000. Last year, there was a gain. This year, there is a loss of or Forex loss of $35,000,000. Last year, there was a gain of roughly about $9,000,000. So that's a $44,000,000 swing, which is sitting in the finance cost. So largely, that's this is the second item. And the third thing is, obviously, you are aware that we had cash coming in the pre IPO and IPO stage. So in the q two, our cash into the fixed deposit was roughly about slightly higher than a billion dollar, and that was generating about 2.5% of interest, fixed deposit rate interest. And obviously, over a period of time, this interest rate has gone down. So that has an impact of roughly about $10,000,000 of lower finance income. So overall, these are the but our fundamental cost of debt, that remains flat at 4.8%. Thank you. And the reason for slight increase in net debt? The slight increase in debt just a second. So one, of course, we have paid dividend of 113,000,000 So that's actually a reduction of cash. The debt increase, one, is because of we have taken some additional loan in Nigeria, additional debt in Nigeria. That's a temporary in nature to pay off some of the CapEx vendors. So that's these are the two major wish reason where the date has marginally gone up. And the lease obligation increase, what you have seen is because of our additional sites which you have put up over the last one year. That has an impact of roughly about $42,000,000 increase in the lease obligation. Thank you, Philippe. Irene, if there are no more questions, I think we can end the call. Thank you. We have no further questions. This does conclude this conference and webcast. You may now disconnect.