Good day, ladies and gentlemen, and welcome to the Airtel Africa half year results. 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 and then zero. Please note that this call is being recorded. I would now like to turn the conference over to Segun Ogunsanya. Please go ahead.
Thank you. Hello, everyone, and thank you all for joining us today. With me, I have Jaideep, our CFO, and Pier Falcione of Investor Relations. Let me give you some brief highlights over the last six months and provide a brief update on the strategy before I hand over to Jaideep, who'll go around with the financial results in detail. Over the last year, the macroeconomic and operating environment has been very challenging in many of our markets.
However, we have been much stronger, having seen considerable progress on our priorities, which has contributed to a successful operating performance across each of our three regions. Very strong constant currency revenue growth performance has helped offset the inflationary pressure on our cost base, resulting in improved EBITDA margin, enabling us to further improve our capital structure. Our purpose is to transform lives across Africa.
The strength of the business supports employment as well as increased contribution to the economy and community, also allowing us to support the increased infrastructure requirement of the many countries where we operate. We continue to bring communities closer and give them the opportunity to access affordable financial services, sometimes for the very first time. Value creation for our stakeholders has been evidenced by these strategic successes.
We have navigated a challenging operating environment to report a strong operational performance with sustained customer growth across all our segments: voice, data, and mobile money. These have been further supported by increased usage across our network, which has given us higher by almost 10 percentage point in constant currency. This sustained demand for our services has resulted in an almost 20% increase in constant currency revenues in first half of this financial year.
Despite the inflationary environment, the strong revenue performance has contributed to an increase in EBITDA margin of 63 basis points. De-risking the capital structure as a key priority, and we are now well on track to fully repay the HoldCo debt, which is due in May 2024. The board has declared an interim dividend of $0.0238 per share. This is up 9%, reflecting our confidence in the long-term sustainability of our business model.
To sustain this performance, we have maintained network investment momentum to provide the platform to further improve our growth ambitions and momentum on our sustainability strategy remains on track and continues to be embedded in everything we do. The next slide.
It's worth putting our performance in the context of the environment we operate in, and I would like to highlight a few of the key issues and how we are working to mitigate against those challenges. One, consumer spending remains impacted by high inflation. However, with our affordable and transparent offerings, we continue to provide value for our customers. Secondly, inflationary pressures remain a challenge for the business, but very strong constant currency growth, operational leverage, which combined with cost optimization, enabled an increase in EBITDA margins for us.
And thirdly, currency volatility across the region is a new challenge for us, but with the focus on reducing dollar exposure across our cost base, we've been able to report a margin improvement over the period.
Finally, despite the first liquidity challenges across some of our markets, we remain successful in upstreaming cash from OpCos, putting us in a position whereby we are on track to fully repay the HoldCo debt when due in May 2024. Let me now give you an update on our strategic priorities and our achievements that highlight how this strategy is working for us. This slide, next slide, captures the key drivers of our future growth potential.
The demographics of our market, combined with the low level of SIM penetration, will continue to support the growth in our customer base, which, combined with increased usage, will drive very strong revenue trends. And very important, the mobile money journey remains at a very early stage across all of our markets, and this will further underpin the growth momentum.
As a group, we're very clear on how we're going to capture this growth. Our win-win strategy has delivered, and we don't anticipate this changing in any way.... Additionally, we have executed very successfully on the last 23 consecutive quarters of double-digit revenue and EBITDA growth, has shown how we as an organization, we have the right framework and mindset to continue delivering.
Now see the growth algorithm on this chart. It shows how our operational success has been achieved, and also explains how we intend to sustain strong momentum going forward. The growth in the customer base across all segments, combined with increased ARPU, as increased usage is monetized, translates into very strong revenue growth. Operational leverage and cost optimization drive increased resources for investment to reinforce future growth, therefore enabling continued customer base growth. This cycle will continue to sustain our strong operating momentum in the future.
Slide 9 shows our strategy, which remains unchanged. The 6 pillars, which are designed to capture the growth opportunity as a way to transform lives across Africa. Our strategy is clearly working. We will continue to seek ways to enhance our service offerings, to enable sustained growth and create value for all stakeholders.
This slide shows the impact of devaluation and the fact that it doesn't affect long-term valuation trends. You can see in the period, our reported currency results have been significantly impacted by the changes to the FX markets in Nigeria. In second quarter, we've incorporated the full impact of the June devaluation, and our reported currency group revenue declined by 4.7%, with EBITDA down 3.3%, as shown in the charts on the left side of this slide.
While the scale of the devaluation is very exceptional, facing FX headwinds across our market is not new. Our strategy focuses on the ability to drive sustained and strong constant currency revenue growth to limit the impact that FX devaluation has on our business. The success of this strategy is reflected in the performance of the company over the last five years.
By growing constant currency revenues on average by 17% each year, we've been able to report a 10% year-over-year growth over the same period, which has in part enabled a 30% growth in reported currency EBITDA. As a result, we continue to focus on long-term strategy of ensuring strong and sustained constant currency revenue growth, which I will explain in the next few slides.
You can see the demand for telecom services is a key driver of sustained growth. We're exposed to markets with some of the strongest population growth rates in the world, as well as some of the most youthful populations. When you combine this with very low levels of SIM penetration across our markets, it provides significant scope for sustainable growth. One of our key priorities is win with data, and the opportunity for increased data adoption across our markets remain very, very significant.
Currently, only 21% of customers use 4G services, and only 40% of our customers are actually using data services. Through continued network investment, our strategy remains to enable increased 4G adoption across our footprint. While we continue to see the opportunity for continued customer base growth, we also see significant scope for higher usage growth across both voice and data. Over the last number of years, we have seen this strong growth in both voice and data usage per customer.
These are driven by a few factors. One, our increased network investment to increase capacity and coverage across our markets. Two, customized and affordable offers to drive increased user adoption. Number three, our continued investment in our distribution infrastructure to increase customer touch points. And finally, the very low average usage of both data and voice services compared to global peers. All of these factors remain very relevant, and will continue to support higher consumption across our network.
Now, the mobile money opportunity. In addition to the telecoms growth opportunity, we're in a very unique position to layer on additional growth in the form of mobile money to further enhance shareholder value. Mobile money services is all about driving increased financial inclusion across our 14 markets.
Low levels of financial inclusion has been one key reason for the 23% average annual growth in the customer base over the last 5 years. It's also been reinforced by the trust that has been built through the provision of easy-to-use services, with a very strong focus on the availability of booths, so customers can access their cash with ease as and when they need it. The chart on this slide shows how mobile money is solving the problem of low financial inclusion across our many markets.
We believe there are 4 differentiating factors enabling increased customer adoption of mobile money services. The first one is branding, the second is distribution, and the third is our strategies of KYC activities, which in our telecom business, ensures we have simplified the onboarding process for new customers.
Finally, targeting micro transactions in an affordable manner to further support increased transaction value. These factors have underpinned our strong historical performance, and will continue to enable a sustained level of growth going forward. The next slide summarizes the outcome of the success of the previous two slides on Mobile Money that I've shared with you.
Our 23% growth in the customer base in the last year, combined with 45% growth in the transaction value, reflects the success of the offering, translating into a 31% revenue growth. With this level of growth, at a very high margin, the opportunity to add additional value above what other telco players in the industry can deliver remains very significant. With this, let me hand over to Jaideep to discuss the financial results in more detail. Jaideep, please.
Thank you, Segun, and good morning and good afternoon to all of you. Let me start with the key financial highlights. Our underlying results continue to be good despite macroeconomic headwinds and exchange rate volatility. We expanded our customer base by 9.7% year-on-year to reach 148 million customers. This helped us to sustain our revenue and EBITDA growth momentum.
Revenue growth for half year was 19.7% in constant currency, with double-digit growth in all three key service segments, namely voice, data, and mobile money. EBITDA grew by 21.2% in constant currency, faster than revenue growth, to reach $1.3 billion in reported currency absolute EBITDA. EBITDA margin at 49.6% expanded 70 basis points, despite high inflation and adverse macroeconomic conditions.
Operating free cash flow at $1 billion was up 5% on reported currency. CapEx for the half year at $312 billion, which was almost similar to the prior period. Leverage at 1.3x was stable. The board has declared an interim dividend of $0.0238 per share, up 9% from as compared to last year, in line with our current dividend policy.
Slide 18. The overall revenue growth was 19.7% in constant currency, while in reported currency, growth was 2.3%. While the impact of Nigerian Naira devaluation is not not fully embedded in half year revenue, since the devaluation occurred in mid-June 2023, due to fully incorporate the devaluation impact.
Therefore, if we apply September 2023 closing rate for Naira throughout the first half of the financial year 2024, the revenue would have declined by 5.1%. For the period ended 30th September 2023, the negative impact on revenue for three and a half months has been $283 million since the Naira devaluation took place in mid-June 2023. The annualized impact of Naira devaluation on revenue at the current exchange rate is approximately $900 million-$950 million.
In constant currency, all key service segments grew double-digit, with voice revenue up by 12%, data revenue up 20%, and mobile money revenue up 31%. Next slide. We show the group EBITDA growing by 3.7% in reported currency to $1.3 billion.
EBITDA has been adversely impacted by $165 million as a result of currency devaluation, primarily in Nigeria. For the period ended thirtieth September 2023, the negative impact on EBITDA for three and half month has been $153 million since the Naira devaluation took place in mid-June 2023. The annualized impact of Naira devaluation on EBITDA at the current exchange rate is approximately $450 million-$500 million.
OpEx increase of $192 million is primarily contributed by the volume driven increase of $120 million related to additional sites and other revenue-linked expenses, and balance $70 million on account of the rate increase, especially in the diesel price in Nigeria. Despite the above headwinds, EBITDA margin of H1 was 49.6%, an improvement of 70 basis point.
Moving on to segment performance in Nigeria. Revenue grew 22% in constant currency, supported by both customer base growth of 5% and ARPU growth of 15.4%. Voice revenue grew by over 16%, primarily driven by voice ARPU growth of 10%. Data revenue grew by over 29%, contributed by 17% customer base growth and 12% growth in data ARPU.
Data ARPU growth was supported by 4G customer base growth of 33%, and 4G usage per customer per month grew by 43%. EBITDA margin at 53.5%, increased to 175 basis points, benefiting from continued operational efficiencies and partially by lower diesel price during quarter two. More recently, diesel prices have started to increase again, and if this continues, we can expect some headwinds in quarter three.
In East Africa, revenue in constant currency grew by 23.6%, driven by double-digit growth in all three services: voice, data, and mobile money. The revenue growth was supported by customer base growth of 11%, ARPU growth of 11.7% to reach $2.7. Voice revenue grew by 14.6%, driven by customer as well as ARPU growth.
Data revenue grew 31%, driven by 28% growth in customer and over 3.4% growth in data ARPU. We further expanded the 4G network across the region. Over 50% of total data customers are 4G, up from 43% of last year, for the similar half of previous year. Mobile money revenue grew by almost 35%, driven by over 16% growth in customer base and 14% in ARPU growth.
EBITDA margin was almost 54%, expanded on a 14 basis points in constant currency as a result of revenue growth, cost efficiencies, and marginally benefiting from the interconnect cost reduction in Kenya and Rwanda. Coming to Francophone Africa, revenue grew by 11.5% in constant currency, while reported currency revenue growth was 14%, higher on account of almost 5% appreciation in CFA, Central African Franc.
Customer base of around 31 million, up 15% year-on-year, while ARPU was flat in constant currency at $3.7. Voice revenue growth was 3.3%, driven by customer base growth, partially offset by drop in voice ARPU, which was impacted by inflationary pressure and political development in few key markets.
Data revenue grew by almost 23%, largely driven by 26% growth in customer base and around 5% growth in data ARPU. Mobile money revenue grew around 19%, driven by 22% growth in customer base. EBITDA margin at 47.2% declined 131 basis points. Adjusting $19 million one-time OpEx benefit that we had in prior period and reported in last year, normalized half year EBITDA margin improved by 185 basis points in constant currency.
Next slide. It shows the key components that led to increase in finance cost. As you can see, the finance cost, excluding exceptional item, was higher by $44 million, largely as a result of increased local currency debt in operating entity, in line with our pushdown debt strategy, as well as increase in baseline interest rate in some of the markets.
Exceptional item loss of $471 million was related to the devaluation in Nigerian naira in June 2023, reflecting the impact of revaluation of USD liabilities and derivatives in Nigeria operation. Coming to EPS. Despite our good underlying performance, with double-digit growth in revenue and operating profit, EPS has been negatively impacted due to exceptional Forex and derivative loss in Nigeria.
EPS before exceptional item at $0.07, was up by 3.2% over the prior period. Next slide. Our capital allocation policy remains same. Our key priority remains to continuously invest in business, along with further strengthening of the balance sheet. Our CapEx guidance remains the same, which is between $800 million-$825 million for the full year.
Returning cash to shareholder through our progressive dividend policy, remains one of our key, key priorities. The board has declared an interim dividend of $0.0238 per share, reflecting a growth of 9%. Next slide. We continue to invest in future growth. We have invested $312 million in tangible CapEx during the first half of the year.
89% of our CapEx investment is geared towards growth initiative, mainly to increase data capacity, coverage expansion, and strengthening the IT infrastructure. We have also rolled out around 5,000 kilometers of fiber network in last one year, resulting in almost 74,000 kilometers of total fiber in our network.
Next slide. Normalized free cash flow. Cash from operations, post-interest and tax payment, was higher by $16 million due to lower cash tax. Additionally, cash CapEx spends were in line with the prior period, while lease liability payments were higher by $23 million. Hence, our normalized free cash flow before spectrum investment was largely stable despite foreign FX headwind.
During the first half, we paid $127 million of license renewal fee for 2100 MHz spectrum in Nigeria, which was higher by $48 million as compared to the spectrum acquired in DRC and Kenya in H1 of last year. We continue to focus on strengthening our balance sheet by firstly, reducing our foreign currency debt across OpCo and HoldCo.
HoldCo debt is due for repayment in May 2024, and we are well positioned to repay the same. Secondly, OpCo local currency market debt increased by $450 million as we continue to execute on debt pushdown strategy. Further, our upstreaming potential is very diversified across our region, not making us overly reliant on a particular region.
Group leverage at 1.3x has remained stable compared to last year. However, the EBITDA used to compute the leverage does not fully incorporate the devaluation of Nigerian naira. If we include full twelve-month impact of the Nigerian naira devaluation, as on date, the leverage ratio is expected to be between 1.3x and 1.4x.
The total weighted average interest rate was 8.8%, vis-à-vis 6.64% in the prior period, due to increase in the base interest rate and higher interest rate on local currency OpCo debt. I'll now hand over back to Segun to conclude the presentation. Thank you.
Thank you, Jaideep. Finally, on this slide, slide number 30, very few words from me on summary and outlook. As you've seen from our results, our focus has contributed to very strong operational and financial performance. We continue to demonstrate positive developments on nearly every key metric. Our near term focus will remain on investing in our network and on further expanding our distribution to be closer to our customers and at the same time building new services for future growth.
Clearly, our results have been impacted by the naira devaluation in Nigeria, but we continue to believe that this is for the good of the economy and will not impact our ambitions in the country. The good opportunity across our markets remain very intact, and we see ourselves well positioned to deliver against this growth.
Although there are some cost elements, particularly in Nigeria, with continued operational leverage and cost efficiencies, we aim to deliver an improved EBITDA margin in 2024 versus 2023 financial year. And with that, I would like to thank you all for your attention today. I would now like to open the floor for questions.
Thank you. Ladies and gentlemen, if you would like to ask a question, you're welcome to press Star and then one on your touchtone phone or on the keypad on your screen. You will receive a confirmation tone that you have joined the queue. If you wish to withdraw your question, you may press Star and then two. For those on the webcast, you may submit a question using the text box at the bottom of your screen. The first question we have is from Maurice Patrick of Barclays. Please go ahead.
Oh, thank you. Hopefully you can hear me okay. Thank you for all the explanation so far. On the EBITDA margin side, I think you spoke about looking to grow the margin in the second half for the full year. You've already shown pretty strong margin growth in the first half.
Given the comments you made around Nigerian energy maybe becoming more of a headwind in the second half, I wondered if you thought you could maintain the level of margin growth into the second half that you see in the first half, or should it be more flattish?
The second question really relates to Mobile Money in Nigeria, if I'm not wrong, from the presentation report. I think revenues are $1 billion, I think, in this last quarter. I'm just curious to understand how you balance the priorities between growing the ecosystem and then when we should start seeing a financial impact coming through. Thank you.
Yeah. Thank you, Maurice. You've seen what we've done over the last 23 odd quarters. We continue to deliver very strong double-digit growth, and our cost efficiencies continue to expand our EBITDA. Although we don't give any guidance any for the future, we're very confident that our operating model will continue to deliver very strong double-digit growth and at the same time lead to very strong, I mean, EBITDA.
Specifically on Nigeria, we put a number of things in place to control costs. Key among those measures we put in place are energy efficiency through use of some electronic equipment which consume less energy. In terms of taking care of our towers, we putting lithium batteries and solar panels working with our tower partners. We're also looking at more grid connectivity to reduce the dependence on the power, on the diesel.
We're doing some transmission redating, and we're shifting a number of recharges from physical agents to digital charges. All these are helping us to contain the cost that we've seen in Nigeria. So we've seen what we've done. We're very confident that our model will continue to deliver very strong double-digit growth in terms of top line and at the same time, very decent EBITDA levels.
Talking specifically about the PSB opportunity in Nigeria, we're very clear in terms of priorities. We want to have a decent customer base before we start thinking of monetization. That we continue to do, to expand the customer base, expanding their networks, and we also keep on building the very wide ecosystem required for monetization.
I think it will take a couple of more quarters for us to get a decent customer number that will permit any very good level of monetization.
Yeah, a couple more quarters before you start to monetize?
Sorry? How many quarters-
You said a couple more quarters. You said a couple more quarters. Yeah.
Well-
Thank you.
I can't give any specific indication as to which quarter we're going to start monetizing. In terms of broadband and the philosophy, our broad strategy once again is to continue to expand our customer base and also expand the agent network.
The numbers are very encouraging in this quarter, and we continue to push all our efforts towards increasing the customer base and expanding the agent network as we create a much wider ecosystem in the short term.
Thank you.
The next question we have is from John Karidis of Numis. Please go ahead.
Thank you very much. Questions. A couple of these are just housekeeping. On the housekeeping front, can I confirm that although upstreaming of cash from Nigeria is still difficult, it's not more difficult than it was before the reintroduction of the willing buyer, willing seller model?
It's really difficult to figure out essentially if there has been any overall progress since the middle of June there. And then secondly, in terms of the housekeeping point, I know that you don't report it as a matter of course. But would you give consolidated CapEx by geography, at least on request, please?
Thirdly, I wonder if there's anything you can sort a trial of building the two data centers in Nigeria and Kenya is going. If there's any sort of reason that you are incrementally more confident about the prospect since we last spoke.
Very lastly, I see MTN Nigeria took business away from IHS, and just working back from the rates, the revenue that was lost, the tenancy ratio looked ginormous. Do you have prospects in any of your markets, and any appetite to move tenancies from one tower co to another, please?
Thank you. Those are very loaded questions. I'm gonna start with the first one on upstreaming of cash. Let me. You know, we operate in 14 different countries, and we've been able to upstream cash from many of the countries in our portfolio. We don't depend on only one country. In the half year, we've upstreamed over $300 million from the many countries in our portfolio, so that is one clear red light for me to emphasize.
And secondly, in the next couple of months and last couple of months, our focus in Nigeria has been on sourcing dollar, not on upstreaming dollar, 'cause you do have there being a number of bad dollar liabilities to satisfy. So that's been the focus in the last couple of months.
Yes, it's been slightly more difficult since we went to the willing buyer, willing seller formula for assessing foreign exchange, but the impact on our business has been very minimal, given the fact that we've got 13 other countries where we're able to upstream various amounts of money to HQ.
As I speak now, we've got enough money to pay off the debt at HQ, the $550 million, which is gonna mature May next year. That shows the strength, I mean, of our portfolio, the fact that we're able to use the various country in our portfolio to upstream the money. The question on CapEx, I will let Jade will take the question on CapEx. The guidance is always between $800 million-$825 million, but once I complete your last three questions, I'll give the mic to Jade to speak about the, the CapEx.
The IHS and ATC equation, I mean, I said that the balance of power is shifting from tower cos to op telcos now. We do have at least three main tower cos we work with, IHS, ATC, and Helios in various countries and portfolios. The renewals are due at various times, I mean. We continue to evaluate each of the contracts, and we do what is best for our business at any material time in the future.
I think what MTN has done is probably an indication to the fact that, I mean, balance of power is not constant, it keeps changing, and we continue to explore whatever we need to do to maximize the windows being opened by constant shift in the tenancy at the various tower cos.
Finally, on the Kenya question, Kenya is one of our best performing markets, and our GSM market is doing very, very well. More work requires to be done on the mobile money business, where is clearly dominant. But when you take away the mobile money business and focus on the GSM only, I've seen the considerable progress in the last couple of years, and this, there's no reason why this wouldn't continue in Kenya, which is one of our largest markets. Jaideep, about the CapEx?
Sorry, John, what was the CapEx question?
Yeah, what was the question on CapEx?
Yeah, so you give us CapEx by geography, but only for mobile services. The same way that you give us consolidated numbers by geography, you don't actually give us consolidated CapEx geography. Or you used to, but you've stopped doing that. I just sort of wondered whether you might give it on request at least.
You're asking for CapEx by region?
Well, firstly, let me clarify. $312 million CapEx, which we spent in H1, includes GSM, mobile money, IT, PSB, everything put together. That's a total CapEx which we spent, which includes the GSM, mobile money, sales and distribution, PSB, and so and so, and IT. So what else break up you need?
No, I understand.
Yeah.
Yeah. I'm just trying to figure out operating cash flow by region. So we have the consolidated EBITDA-
Oh.
In Nigeria, for example, but we don't have the consolidated CapEx in Nigeria. We only have the wireless services. Anyway, I'll take that offline.
But we take it offline, John, because we don't break up CapEx on Airtel Money by region. So... But I can give you three numbers you can note down. In Nigeria, total CapEx-
Yes, sir.
$312 billion for the first half. East Africa, $111 million, and Franco, $80 million. That takes us to total $312 million.
Fantastic. Thank you.
The next question we have is from Madhvendra Singh of HSBC. Please go ahead.
Yes, hi. Thanks for taking my questions. Just few questions from my side. Firstly, follow up on the diesel cost and its impact on the Nigerian margins. If you could quantify, you know, how much of the margin uplift was because of lower diesel cost, that would be quite helpful. And then secondly, you know, you talked about the FX repatriations and so on from Nigeria. I'm just wondering, you know, how is your access to FX overall, especially post the liberalization of the FX rate? I mean, are you able to get enough dollars for your CapEx? And how does that change your CapEx budget in Nigeria, if at all? If you could talk about that, that would also be helpful.
And then, finally, just wondering about any update on the price hikes, which was supposed to come through in Nigeria. Is there any hope for that, or that should be put into the bin now? Thank you.
Sorry, and then, what?
The price, the price increase in Nigeria. Let me start with the last question about the price increase in Nigeria. But it's important for me to explain our philosophy to you very clearly. We really rely on the usage increase to drive revenues. We rarely use price. Of course, if there is an opportunity for pricing, we do the pricing, but our growth algorithm doesn't really depend on pricing per se, to offset any part of inflation. We relies on driving much faster in increase in usage levels, whether it's voice, whether it's data, whether it's mobile money consumption. And that's what we've done in each of our quarter, in the last maybe quarter, in the last many quarters. So if, there's an opportunity for pricing, we'll take it.
But despite the fact that there is no huge increase in pricing in Nigeria, we've managed to deliver 20% growth in the first half of our financial year, and we continue to just drive operating efficiencies. We continue to use our various affordable price points. We continue to expand our 4G network to really drive increased usage of data, usage of voice, and usage of our very nascent PSB opportunity to increase revenue. And as we continue to engage regulatory authorities on the price adjustment when required. Your second question is on FX repatriation. Yes, it's been impacted like it's common in the seller scenario in Nigeria. It's not really increased the liquidity. But we're not shy of investing in Nigeria. We're a long-term player in the country. We continue to believe in the long-term viability of Nigeria.
We've not slowed down any of our investment that we planned for Nigeria. We continue to put money behind our 4G network, behind our fiber infrastructure. We're putting a new data center in Nigeria. So yes, there's been slower in terms of dollar liquidity, but despite this slowdown, we've not slowed our own investment in the country because we're a long-term player in the country. And Jaideep will talk about the margin question. Jaideep, the question?
Yes. So, on the diesel, I can give you a sensitive, broad sensitivity. The benefit of quarter two, because of the fuel price drop, was roughly about $10 million in Nigeria. The other sensitivity is that every 10% increase in Nigeria fuel price, diesel price, impacts us about $4 million-$5 million a quarter. Every 10% change, which is roughly about 0.3%-0.4% of overall Airtel Africa, EBITDA margin. So that's the sensitivity, from the current diesel price, because it is... It has moved so many times and so much fluctuation happened, it's very difficult to point out exactly what is the impact. But broadly, it's about a percentage point in benefit which we got in Nigeria, P&L.
A 1% margin improvement in Nigeria because of the diesel price drop, which happened in quarter two. Having said so, in October, we have started seeing now the price has again gone up.
Uh-
Thank you.
Thank you. Does it answer your question?
Yes, yes. Thank you. Thank you very much for your, your answer. That is very helpful. Thank you.
All right. Thanks.
The next question we have is from Rohit Modi of Citi. Please go ahead.
Hi. Thank you for taking my questions. Most of them have been answered. Just two questions: firstly, on Francophone. The growth rate, particularly in Francophone, has declined. Now, I know in past you mentioned that, you know, it's been underinvested in 4G, and you are investing and catching up on 4G. What's the situation now, or why the growth rate has been, you know, declining in Francophone countries? Secondly, just wanted to understand your contract with AMT. The towers where you are anchor tenants, do you get any kind of discount if you have additional tenancies coming in on your lease rates? Thank you.
On the Franco countries, I mean, we continue to invest in 4G network in those Franco countries. In the last quarter, in the last ten and a half year, we've had a number of unusual political developments in a few of the countries in Franco, and those political developments affected our business. We more or less, I mean, off those political developments now, and we expect our business to return to normal levels of growth. Yes, we did have an impact from political developments in two of the countries in our portfolio in Franco-Africa, and those development did affect our business in the last half year. For the tower co. Jaideep, you want to-
Yes, we, if there is a second tenant, then depending on which country, which tower company, obviously the percentage varies, but we do get a second tenancy benefit whenever there is a second tenant coming in the site.
Very well. Thank you.
The next question we have is from Oluwaseun Arambada of FBNQuest. Please go ahead.
Thank you. Thank you for the opportunity to ask questions. My question will be around the reference exchange rates, for conversions. I think your report says the reference rates was that of the closing as at June thirtieth. But to my mind, I would expect that, you know, the conversion rate would probably be the average period, say, from April to September. So I just want to know what goes into forming your reference exchange rate as it pertains to Nigeria.
Okay, so let me answer that question. So what happens is when you come to the PNL, we take the average rate, and there is a reason for that. Keep in mind that Nigeria books are maintained in local currency. Every country, the books are maintained in local currency. So based on a daily rate, you are supposed to restate, which is impossible to do. So what we do is, we do take the opening and closing rate of the month or opening and closing rate for the quarter, so that's what is referred as the average rate. Technically, if you do the restatement every day versus this average rate, there will be hardly any difference. It will be very similar. So when we convert the local currency book into the USD, we take that average rate for the month and we apply that.
However, the dollar liability, which is there in the balance sheet on a particular day, let's say in this case, let's say 30th September, or if you remember quarter one, when we restated our books as on 30th of June, we restated that based on the spot rate of that day. The spot rate of 30th June was 752. That's why if you re-recollect, we had a $471 million impact, which was shown in the exceptional item as a part of the finance chart. That is a restatement or revaluation of the balance sheet liability, which are dollar liability, and that impact is taken in the finance expense line item. The PNL is based on average rate.
The dollar liability is based on the spot rate of the last day of the month, and that is what we convert, and that impact is taken in the finance expense.
All right. Thank you.
Thank you. The next question we have is from Curtis Schacht of Sustainable Capital. Please go ahead.
Hi there. Thank you very much for taking the time. You guys have mentioned over, some of your previous calls that you've been looking to shift your cost base from hard currency to local currencies. But it'd be great just to get an update where you are in that process, also to understand the key areas where you're focusing that on, and, and is that perhaps linked to the shift in bargaining power with the tower companies that you mentioned earlier on the call? Thank you.
Can you say that again?
Dollar OpEx versus local currency OpEx.
Yeah, Jaideep. Yeah.
Currently, at an overall Africa level, if you take our dollar-pegged OpEx, it will be in the range of 7%-8%, 9% not more than that. We have been, over the period of last few years, we have been constantly working on reducing the dollar-pegged operating expenditure so that this impact is not very significant. That's what you can also see in our EBITDA margin. That's what our EBITDA margin, we have been able to sustain not much impact on the margin, because we have very little left now on the dollar-pegged OpEx. What, where you see the impact maximum coming is wherever we have either a dollar loan or a part of finance lease obligation, which is dollar-pegged. Payable in local currency, but it is dollar-pegged.
Dollar loan or derivative and finance lease obligation, the portion which is dollar-pegged, these are the... This is the liabilities which need to be restated or revalued on a particular day of the closing day of the quarter. That's what we have to restate it. That's why the impact is what you have seen when the Naira devalued from 752. That's why the whole impact hit us in quarter one. This quarter, Naira devalued from 752 to 774 or so, so the impact is much lower, only $35 million kind of impact. This is where the impact, what you see in the PNL, the liability restatement. In the overall PNL up to margin level, our impact is very, very less or little at this moment.
We continuously work on, even to ensure that that 7%-9% also keeps coming down. Wherever we are able to source the US dollar, we will pay the foreign currency debt as quickly as possible so that the further devaluation risk is mitigated.
Great. Thank you. I mean, perhaps then as well, if you could just expand on, you know, when mentioning the shift in, in power from the telcos to the tower companies. Perhaps just if you can comment, you know, how that, how you see that playing out in the future? I mean, will it result in low lease rates or, you know, just, just trying to get a sense of, of how the market will, will shift going forward.
In terms of,
What, what the shift of power from, in-
Oh, okay.
You know, the construct of the tower co contracts, I mean, differs from one telco to another telco. It depends on where you start with and whether you've sold your towers to the tower co, or it's just a restricted lease agreement between you and the tower co. So depending on the structure of your underlying contract, there are various routes you can take when the contract expires, and I believe one of our competitors, as I mean, is trying to change, I mean, from one tower co to another tower co. What we continue to do is to look at the construct of our contract to see whether we can move a lot more of the source currency from hard currency to soft currency. Our preference is to move as much as possible of the rental from dollar into local currency.
We continue to do this, but our preference is also to continue to share the impact of the increase in price of diesel. We continue to work with the tower cos on this. Also look for ways of changing from fossil energy to renewable energy, use more of batteries, use more of solar panel. We continue to work with the tower cos now to really, the business for sharing the cost of this investment in order to reduce operating expense. There are various levers that can be pulled, and each one depends on the particular circumstance of the telco and the tower co. There is no one card for every tower co and for every other country. We continue to apply different levers depending on the circumstance we are in, in the country.
Excellent. Thank you.
Thank you. We have no further questions on the conference call, and I would now like to hand over to any webcast questions.
Segun, one question from the web. If you could expand a little bit of what can be done commercially, operationally, in Nigeria to offset or recover the impact from the naira devaluation?
Well, there are two things that are possible. One is continue to grow your top line. We continue to do a very strong double digit. The second one is continue to watch your operating expenses, and Jaideep has explained how we've moved most of our OpEx lines from foreign currency to local currency. In Nigeria, less than 7% of our OpEx are denominated in foreign currency, so we are more or less, I mean, protected, I mean, against, I mean, currency changes. The areas where we have very little control over, there are one in terms of CapEx. We still import, I mean, most of the CapEx we use to expand the network. We have these liabilities we need to pay in local currency, but is actually tied to the US dollar.
Finally, some of the foreign currency debts we took to really make sure that our CapEx vendors continue to supply equipment to us. Those are fairly more difficult to address. But in terms of, I mean, above EBITDA line, we've been able to really contain the impact of the currency devaluation on EBITDA. But below EBITDA, which is where we have the finance costs, slightly more difficult, given the fact that we have to continue to pay the vendors and we're not slowing down on our investment in Nigeria.
Thank you. I try... There are a few questions now on the naira devaluation, which I'll try to summarize. Jaideep, if you can, summarize the different components of the naira devaluation in EBITDA and on finance costs, which come from the devaluation of the foreign currency liabilities in Nigeria, and including why the impact on EBITDA is high and maybe is higher today compared to June.
Okay. So this is, you are referring to the sensitivity of Nigeria?
Yeah. How does it work? So when the naira devalues, it impacts-
Okay.
EBITDA and so on.
As I explained a couple of questions back, when we convert the P&L, we convert it based on the average rate and both the revenue and EBITDA margin, EBITDA, operating profit, everything gets divided by that average rate. While you see that there is a, and we have given that sensitivity, that if we take the full year impact based on the 30 September rate of naira, that full annualized impact is roughly about $900 million-$950 million drop in the revenue line item, and about $400 million-$450 million, which is roughly about % of the revenue drops. That comes in the margin.
Now, the margin percentage continues to be at the same level because it's an almost similar amount of drop, which also established the fact that just now what Segun has explained, and I've also explained, that our dollar-denominated OpEx is insignificant, and that's why you don't see the margin drop, because it's a denominator applicable for both revenue and EBITDA. That's one part of it. Full year impact, why we said that full year impact, if we apply the current rate to 950, because you have seen that first quarter, April and May, we have the rate of 464. In June, we started the full month with 464, then it went down to 752. The average rate for June was coming to some 500 something. What happened?
Seven fifty-two, further dropped to seven seventy-six, but the average rate for quarter two is much lower. The much lower impact, because the average of 752 and 774 is about 760 something, 761 or something. That impact came down. However, you will see this impact continuing for quarter three and quarter four. We have to keep that in mind, because the denominator for quarter three and quarter four will continue to be... Let's assume that the Naira further doesn't devalue. It is continuing at 774. The quarter three and quarter four will still have a denominator, which is 774. If it further devalues, then the average rate will change. That is the sensitivity which we try to give based on the full year number, based on the current rate.
The full year impact is about $900 million-$950 million of revenue drop, and $400 million-$450 million of EBITDA drop. The impact of the same, the large part of the dollar denominated liability restatement has already happened. So that you don't... So if Naira further doesn't devalue, and if my dollar liability doesn't go up, then there will be no further impact in the finance expense. That's the way it works. If my dollar liability goes up and 774 is the rate for the rest of the year, then only to the incremental dollar liability I will have a finance expense.
But otherwise, there will be no impact in the finance expense if the Naira continues to be at NGN 774 or NGN 775, and the dollar liability also by and large remain at the same level. No further impact in Q3, Q4. I hope I have been able to explain. It's a complicated subject, but-
Yeah. Perhaps you can give a broad overview of what type of foreign currency liabilities we have in,
We have a dollar debt. We have to take last two years some dollar debt to cater to the CapEx vendor. We have a dollar debt, we have a lease liability, and we have creditors. All put together, we have roughly about $780 million-$800 million of dollar liability in Nigeria as of 30th September. Those liabilities have to be restated, and that's what you see the impact.
Okay, thank you. And probably the last one, Segun, is around if you can provide some color around market competition and the trends you're seeing in East Africa and Francophone Africa, including some key differences in consumer behaviors in these two markets, if any.
East Africa is a very mature market for mobile money. Africa is zero, more than 10 years, so we shouldn't be surprised that we are very mature at the mobile money operations in East Africa. Our operations in Uganda, Tanzania, Zambia, Malawi, they are way ahead of operations in other parts of our portfolio, mainly because of the culture of using mobile wallet in East Africa for payments, for transactions, and a lot of financial progress have been put on top of the traditional mobile money opportunities in East Africa. In French Africa, Francophone Africa, we started a little bit late. Not only us, all the telcos have started very deeply mobile money services in Francophone late. So very early stages, and only a number of countries have recent levels of mobile money penetration now.
When you have such low levels of mobile money penetration, you start with basically cash in, cash out, and maybe using the wallets for recharge of telephone wallets. That's where we are now. The key difference is the level of maturity. In East Africa, a lot of mature products are available, financial services are available, loans are fairly mature, insurance products, saving products have been sold using the mobile money wallets, which is really not available in a French-speaking country, given that mobile money is just emerging in those countries.
Thank you. And there were questions on PSB and pricing business in Nigeria, which we've already discussed. So we have no more questions, operator, and we can, we can close the call. Segun, if you have any closing remarks?
Yeah, thank you very much. Just to reassure everyone that, the strength of our business, I mean, is, really great. We've delivered another set of, results despite the very challenging operating environment. In constant currency, we've grown, revenue by almost 20%. Our voice revenues are up 10%, data revenue up 20%, and mobile money revenue up 31%. We've expanded our margin by almost, I mean, 60 basis points in constant currency, 73 in the reported currency. All the metrics are pointing in the right direction. It just shows that our strategy is working, and, I thank every one of you for joining us this afternoon. Thank you. Bye.
Thank you.
Thank you.
Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect your lines.