Ladies and gentlemen, welcome to Q3 2020 Results Conference Call of Airtel Africa. Today's speakers are Raghu Mandava, Chief Executive Officer, Jaideep Paul, Chief Financial Officer. All lines are now closed except for the speakers' line. If you would like to ask a question to the speakers, please press star one on your keypad to connect with the operator. Before we continue, I will present an important disclaimer. This press release 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 investors' press release available at https://airtel.africa/investors. This conference call will be recorded, and the transcript will be posted on the website. The first speaker today will be Mr. Raghu Mandava. Please go ahead, sir.
Good evening, everyone. Thank you for joining today's call. Airtel Africa. I will, in the next few minutes, highlights from the last quarter performance published today. This is now the eighth consecutive quarter that we have delivered a double-digit revenue growth and an EBITDA margin expansion in constant currency. During the last quarter, the revenue on constant currency basis has increased by 14.2% over last year, taking the cumulative nine-month performance to a little over half billion USD, which is a 12.4% growth over the previous year same period. The improved performance is a result of our recovery in Rest of Africa and our continued dominance in Nigeria and East Africa. In line with our strategy that I've shared in the past, we are seeing growth across voice and mobile money. Our customers have grown 9.4% and have now reached 107 million.
The voice revenue for the quarter based on this customer growth has now grown to 5.3% for the quarter. We have continued to strengthen our data networks through further rollout of 4G and also through acquisition for additional spectrum. Data revenues grew by 41.3% in the last quarter. This is through a combination of data customers growing by 12.4% and data ARPU by 23.6%. The average data consumed per month by our data customers has risen to 1.9 GB per month per customer. This is compared to 1.2 GB per month a year back. We have now completed the launch of 4G across all markets and are able to provide high-speed 4G networks across all the 14 countries. Mobile money. Mobile money is a critical growth driver for our business. Our mobile money customers have grown to 16.6 million, which is over a 20% growth over the previous year.
The total transactions on Airtel Money have now reached $8.3 for the last quarter, which is a 31.7% growth over last year. This helped Airtel Money revenues grow by over 30% during quarter three. During the quarter, we have entered into a number of exciting partnerships with Mastercard, Ecobank, and Finablr. Just last week, we have signed another partner, this time with Western Union. These partnerships with the international money transfer companies are helping us enable our customers to directly get international money into their wallets. With Mastercard, we have launched a virtual card which will enable our customers to have access to all of Mastercard merchants and especially the online payments. One final point on mobile money, we are still awaiting for approvals regarding our Nigeria payment service bank license. We remain positive and are actively engaged in the ongoing discussions with all relevant stakeholders in this process.
As you would have seen above, data and mobile money are the key growth drivers for our business. Together, they contribute 37% of our overall revenues, and together they are growing at about 38.4%. From an operating perspective, our underlying EBITDA is now at $399 million for the quarter, and this is a jump of 18.9% on a constant currency basis, taking the EBITDA margin for the quarter to 45.2%. Now let me talk to you about the performance of our three markets, Nigeria, East Africa, and Rest of Africa. Nigeria continued to deliver an impressive performance with a growth in revenues of 23.9% during the quarter. Demonstrating the huge demographic opportunity, voice revenue grew at over 15%. Data revenue well over 70%. Data revenues contribute to 32.5% of our revenue.
That's almost a third of our revenues come from data, and this, as I told you before, is growing at almost 73%. Data customers grew by 12.2%. While the overall revenues grew at 23.9%, EBITDA grew faster at 25.6%, taking the EBITDA margin to 54.7% for the quarter. Now let me come to East Africa. East Africa revenues grew by 13.6%, driven by growth in both data and mobile. Voice revenues also supported by growing at 4.3%, while customer base grew at 11.4%. Data revenues now contribute percent of our revenues, and mobile money contributes almost 18%. Data revenues, which contribute 26%, have grown by 34%, while mobile money has been growing at about 40%. Rest of Africa has shown improvement, with revenues coming back from a negative growth being broadly flat in the quarter on constant currency terms. However, on nine-month basis, we still 1.9% compared to last year.
EBITDA margin for the quarter was at 37.5% in rest of Africa. Taking a step back, overall, continues to show positive momentum and in line with our belief that due to the unique customer penetration at about 44%-45% in our Sub-Saharan markets, there is an opportunity to grow voice revenues. Our strategy to invest in 4G has helped us grow data. Our commitment to financial inclusion, and for that, building both a wide distribution for cash and float availability and the partnerships that we have tied up for increasing the use cases on mobile money have helped us grow mobile money business. The growth across voice data and mobile medium term aspirations for revenue and profitable growth. These results are the effect of our clear and simple strategy backed with Focus 6, and our unique position as a leading telecom player in the Sub-Saharan market, and our best-in-class talent.
I will now hand over to Jaideep Paul, our CFO, to take you through.
Thank you, Raghu, and good morning, everyone. Let me start by summarizing our overall financial performance in Q3 2020 and run through our main markets. We delivered a strong and consistent set of results in this quarter. Our operational performance remains strong, and we continue to grow at the KPIs level in both value and volume, as described earlier by Raghu. Sustaining our operational momentum allowed us to generate solid results. Reported revenue increased 12.8%, while constant currency revenue growth was 14.2%. For the past nine months, the foreign exchange devaluation, which had an adverse impact of $54.2 million on revenue and $21.8 million on underlying EBITDA, largely driven by the devaluation of the Zambian kwacha and Central African franc. The currency exchange rates in other markets broadly stable compared to the same period last year. Our blended ARPU increased by 3.8%.
Data ARPU increased by 23.6%, as more customers are adopting 4G and also the data usage per customer continued to grow. Mobile money ARPU increased as well by 12%, while voice ARPU declined by 4.6%. We continue to grow revenues, but at the same time, we remain focused on our cost. Q3 '20 was $399 million in reported currency, resulting in EBITDA margin of 45.2%, up 184 basis points vis-à-vis last year on reported currency basis. Underlying EBITDA margin in Q3 '20 expanded by 178 basis points in currency terms. As a reminder, our effective tax rate for nine months before exceptional item was 41.7%. This was a marginal increase due to higher withholding tax on dividend from the subsidiaries and expected to remain broadly the same year.
Our exceptional item in quarter ended December 2019 benefited from $27 million of one-off gain, largely as a result of reassessment of the life of customers, leading to decrement of customer acquisition cost. Additionally, I would like to share with you some more information. We have continued to deleverage, and at the end of quarter Q3 '20, our leverage ratio remained at 2.2 times. As highlighted in H1 '20, we have a transparent investment, sustainable capital structure, and cash distribution to the shareholders. In nine-month period, we generated free cash flow of $391 million, up 90.4% as compared to the last year. The increase in FCF contributed by underlying EBITDA increase, lower interest cost due to lower debt, and partially offset by increase in CapEx due to network as well as the rollout of additional sites.
CapEx at the end of nine months was $396 million while the full year CapEx guidance remains between $650 million to $700 million. Looking at Q4, I would like to remind all of you that our historical CapEx cycle is slightly skewed towards Q4. Due to this, we may have a subdued EBITDA and FCF growth while both still delivering against our full-year expectation. That's all from my side. Back to you, Raghu.
Thank you, Jaideep. I'll now hand over back to the operator for the question and answer session. Jaideep Paul and Pier Falcione, Head of Investor Relations, Airtel Africa, join me to answer your questions, please. Over to the operator.
Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced. You can cancel your request at any time by pressing the hash key. Your first question comes from the line of Maurice Patrick of Barclays. Please go ahead. Your line is open.
Morning, guys. It's Maurice Patrick here from Barclays. A couple of questions from my side, please. The first question on Nigeria, where clearly very strong growth continues in the market. I was just curious as to how much of the growth is coming from new footprint areas rather than in footprint. I note that there is very strong growth in the towers. Some of that presumably is rural expansion, some is infill, that mix of what's new growth versus existing footprint. Just secondly, please, on the outlook for spectrum costs. You paid, I see, NGN 70 million in Nigeria. Do you anticipate any other spectrum auctions or payments coming up in the next 12 months? Thank you.
Okay. Let me answer the first part, I'll request Jaideep to help me with one on the spectrum costs. What has been our strategy? If you see our strategy of our network roll-outs, has been on doing a single RAN network, which has 2G, 3G, 4G, as we want to progress by doing a software upgrade and rolling out networks. The voice growth was 15%, which is a mixture of customers in the current areas that we service and a few new areas. There is a mixture of both new areas, and that's in the voice growth. However, a large part of our data growth, which is coming due to 4G drive, which has grown at 70%, comes heavily from the existing large urban towns.
If you ask me, there is a mix of both the revenues, largely as of now, because it is more data-driven, while there is also continuous growth on voice that is happening. I would say it's a reasonably good mixture between the two. As regards the CapEx, and the costs on, sorry, the cost on spectrum, I'll request Jaideep to take this answer.
As we have said earlier, that we have intention to buy 10 MHz of 900 spectrum at $74 million of principal amount, plus there will be some regulatory fee attached to it. We filed our applications for the spectrum buying with the regulator, it is yet to be approved by the regulator. Once the regulator approves it, we will make the necessary payment. As of now, we still haven't made the payment because we are waiting for the approval. As opportunity of spectrum, we continue to look at this opportunity of buying spectrum either through auction or through the regulator bid process, that will continue, we will see where we can buy additional spectrum as we go forward.
Very clear. Thank you very much.
Thank you.
Thank you. Your next question comes from the line of JB Davids of JP Morgan. Please go ahead. Your line is open.
Thank you. Congrats on the results. Two questions from my side to start. Firstly, on Nigeria, in the introductory remarks on the PSP license, you said you remain positive and were in discussions with all stakeholders. Just wonder if you could provide us a timeline around when you expect that license to be issued. At the first half, you seemed fairly confident that that would be done by this sort of time of year. Switching gear to Mobile Money. Growth rates are still very strong at 30% in the quarter, but it does look like that has slowed from the second quarter. If there is a slowdown, it looks like it is on the ARPU growth year-on-year, at least in constant currency terms.
Just wondering if anything's sort of changed or worrying you on the momentum in Mobile Money, or is this just a base effect? Thank you.
Okay. I'll answer the first question. I'll request Jaideep to take you through the Mobile Money growth rates. Nigeria PSP, I agree there has been a delay from what we had expected earlier. However, our application is still filed. We are still waiting for the response. While I may not be very clear of the timelines as to when we should be getting it, we surely still remain hopeful. We are continuing to engage anyone. Over to you, Jaideep.
Thanks, Raghu. On Mobile Money, Mobile Money is becoming a larger part of our business. As you see, the contribution of Mobile Money continues to expand in the overall business. It is still growing at 30%, which is quite healthy growth rate, and now contributes almost 10% of the total revenue. In Q3 2020, the year-on-year expansion compared to the same period of the prior year, was slower due to the fact that last year we benefited from the extensive distribution rollout in markets like Zambia, Tanzania, and Gabon. We got a one-time significant, but as we progress, it is of course, coming to a steady state level. Therefore you've seen that slower growth. Having said so, I reiterate that all the KPIs for the Mobile Money continues to be very healthy and on an upward swing.
Thank you. That's very helpful.
Thank you.
Thank you. Your next question comes from the line of Jonathan Kennedy-Good of Standard Bank. Please go ahead. Your line is open.
Good morning. Thanks for taking my question. Just wanted to check with you, given the movement on potential licenses in Ethiopia, whether Airtel Africa would participate in that, and if so, do you believe the balance sheet is strong enough to roll out without raising further capital? Also in the rest of Africa, obviously, seen some positive trajectory on the revenue side. Just some color on how we should think about revenue growth going forward there and what are the major drivers of the recovery. What kind of pace of recovery would we expect?
Firstly, the way I would look at our portfolio is this. We have a few large markets, where we see still a huge potential for growth and investment. Our growth organically has been healthy, and we see huge potential both on voice, which is a unique contribution of 44%, and very big on data. There is also a mobile money opportunity across these countries. We are also looking at opportunities like wireless home broadband and the enterprise business for providing growth impetus. At this stage, we may not look very positively towards investing outside beyond our geographies. As regards to rest of Africa, if you notice, while the rest of the East Africa and Nigeria first and East Africa started kicking in into higher growth, rest of Africa did lag behind. Part of the reason is also the way we phased out our 4G investments.
Quite a few countries have got into 4G only in the current earlier part of this current, like DRC, Niger, and Chad and others. I do hope this 4G momentum will kick in, and we should be looking at a reasonable growth in these places. However, I'll not be able to give any forward-looking statements on how much growth I would expect from rest of Africa at this stage.
Great. Thank you. That's very helpful.
Thank you.
Thank you. Once again, if you wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced. Your next question comes from the line of Dilya Ibragimova of Citibank. Please go ahead. Your line is open.
Hi, thanks very much for the opportunity, congratulations on the results. I had a couple of questions, please. First is on customer growth. In Nigeria, there seems to have been a slowdown in net customer acquisition, the churn has been trending up in the quarter. I was just wondering whether there are any one-offs maybe related to some of the biometric identification exercises that were published with ongoing last quarter, and whether you expect that to normalize. Second, on the customer growth in East Africa, whether you could give a few comments whether there's any geography in particular, which is driving strong net adds in the region. Last question is on Airtel TV. You mentioned that you've launched the service in a few countries, and one of the countries is Nigeria.
I was just wondering if you could give us a bit, maybe some anecdotal comments, on what the customer perception is like, whether it's a popular product, whether that helped acceleration maybe of data customer growth. Yes. Any snippets on how the product is perceived would be great. Thanks.
Okay. First is Nigeria customer growth. Nigeria, during the previous years, we used to have a service called the voicemail, which we used to count in our customer numbers for having accessed it when they receive a voicemail message. However, we have corrected our system and stopped this, which was happening by default, so that we took a one-time correction in customers and removed about 2.5 million of them. That is the sudden drop of 2.5. Otherwise, like-to-like basis, it would be up by 2.5 million more. That is the first reason why you are seeing a sudden slowdown there. Otherwise, I see the customer growth continuing. East Africa, I should say that we are quite pleased to say that it's more or less well spread out growth.
As I spoke before, the unique customer is about 44%-45%. That means there is a potential to grow at least in double digits in each of these markets. I think what you are seeing in East Africa is about a 13% growth in customer numbers. I think that is steadily happening with a few points here and there across all these geographies, all the countries. We are seeing that very good steady growth across East Africa.
Let me come back. This growth in customers is what is driving our voice revenue growth. While most, Africa is in a unique situation thanks to its penetration where we are able to get growth in all three, voice, data, and mobile money. As I've spoken before, this continues to get reflected in our results also. Let me step back and talk to you about this Airtel TV that we launched. The availability of data in most of Africa and why 4G is a big thrust area is the following. Unlike in most of the Western world, where there was a fixed-line data available in-house and homes, and people used a mobile phone and the mobile network's data only when they were traveling. This was data while being mobile. In Africa, mobile data is the primary source of data availability.
Second, entertainment sources are also, mostly if someone wants to watch a movie in Nigeria, it would be through a CD that you would buy at a few hundred NGN, or cable connections and others, which are not very well spread. We believe if this entertainment has to spread, people should have access to start seeing this over their data networks. What we have is an Airtel TV official app in which there is a whole lot of content, which we are continuously expanding, which people can see free. Large amount of this content will be able to see without any subscription charge, and this will just enable and enhance data usage in these countries. That was the flavor of this.
Currently, we have some content, some Indian Bollywood content, and various other music, and also a large number of live TV channels, so that people can start using this wherever they are, and they have no other service of reaching out to these media. We believe this will encourage more viewing and more data consumption on our data network. That has been the principle behind it. We've just launched it last December, post mid-December. I guess it's a little too early to give more anecdotes, but we are seeing good usage.
Just to follow up on this one particular comment. Is there a cost associated with the content?
Yes, there is a cost associated, as far as possible, we would buy these contents either on a fixed base deals, or we would also take it on a deal. A large amount of live TV comes at a very nominal cost.
Okay. Thank you.
Thank you.
Thank you once again. Please press star one if you wish to ask a question. Your next question comes from the line of Kristen Casimir of Nation Media. Please go ahead.
Hello. Thank you very much for the presentation. I just wanted to ask, in Uganda, the licensing framework has been changed, and there's a deadline that has been given for telecoms to apply. I wanted to know, has Airtel applied for a license, and which type of license, and how much is it likely to cost?
Ugandan government has asked to apply for the various licenses they have put up. One of them is called the National Telecom Operator license, whereby the other license is called the PSB, which is a Public Service Broadcaster license, and the Public Service Infrastructure license and many others. There are about five licenses. You could choose and apply for one of them. We, as one of the leading players in Uganda, we intend to apply for the NTO license. The deadline for expressing of interest for these licenses is March 30th. Sorry, January.
31st January.
31st January. My apologies. 31st January, we would be applying before that for the NTO license. As of now, we are still in discussions, and we have no clear indication of what it could cost.
Okay. Thank you so much.
Thank you.
Thank you. Your next question comes from the line of Lilia Breiknova of Fitch Ratings. Please go ahead.
Thanks. Just a follow-up on the conditional approval of the merger in Kenya. You've made any comments whether you see those conditions as acceptable? What's the timing that you think the transaction would be completed? Thank you.
Okay. The process for application has been on course. We have received preliminary approvals from agencies. However, the final approvals have not been received. We are also in discussions on certain criteria and conditions that have been applied. I guess as of now, I should say that approval is still in process, and it's very difficult for me to give a reasonable timeframe on this. Hopefully, it should go through with all the relevant conditions being met.
Thank you.
Thank you.
Thank you. Your next question comes from the line of John-Paul Davids of J.P. Morgan. Please go ahead.
Hi. Just following up with a couple of housekeeping questions, please. On the cash flow statement, your cash PP&E and cash intangibles gets quite close to $600 million. The P&L CapEx is $400 million. Should we expect those to converge in the full year results, so cash and P&L similar, or will you be expecting some base spectrum numbers in there which we could?
Yes. Eventually these two will definitely converge. What happens is there is a timing difference for the cash CapEx and the actual CapEx book, and that difference technically at some point should be similar. This difference remains, and that's the reason when we calculate the free cash flow, we take the full CapEx instead of cash CapEx, so that the non-cash CapEx is factored in the free cash flow. What was the second? Sorry, what is the second question? Any other spectrum? David, we seem to have missed. Is there any other question?
David, please could you press star one again? Thank you. I'll reopen your line. Please go ahead. We can hear you now.
There we go. Hi there. Then just a quick follow-up on the Malawi IPO. Will those proceeds be received in the fourth quarter, or have you already received them in the third quarter? Thank you.
The IPO, the book closes by end of January. Once it goes through, the proceeds will come in quarter four.
Thank you.
Thank you. There are no further questions at this time. Once again, please press star one if you wish to ask a question.
Okay. As there are no more questions, thank you all for being on this call. I do hope we will once again catch up end of next quarter, which will also be the time when we will be announcing our annual results. Thank you. As it is still in January, a very happy new year to all of you. Thank you and a good day, please.
Thank you, gentlemen. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating, and you may now disconnect.