FSDH Initial Reaction: Airtel Africa Plc 3Q22 results 
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February 7, 2022/FSDH Research

Key Performance Highlights:

• Airtel Africa recorded a stellar 17.9% YoY revenue growth in reported currency to US$1,219 million in 3Q22, on the back of a solid 20.2% YoY growth in 2Q22. The revenue growth in 3Q22 was powered by a 13.8% YoY ARPU growth, supported by a customer base growth of 5.8% YoY to 125.8 million. The revenue growth was even higher in constant currency terms (+20.0% YoY), partially offset by currency devaluations. Looking at segmental revenue growth, voice revenue grew 7.4% (+9.9% in constant currency), data revenue was up 34.4% (+37.7% in constant currency), and mobile money services revenue grew by 34.4% (+29.2% in constant currency). The revenue growth was evenly distributed geographically, with Nigeria revenues growing 23.3% YoY, while East Africa recorded 21.9% revenue growth and Francophone Africa recorded 13.5% revenue growth in constant currency.
   
• The company’s operating profit vaulted 26.4% YoY (27.8% in constant currency terms) to US$414 million in 3Q22, as a result of solid revenue growth and improvements in the operating efficiency across all the regional segments. Airtel Africa also recorded an Operating exceptional item of US$20 million relating to a settlement in Niger in 3Q22. Net finance costs were lower than the prior-year period, driven by lower forex losses. Total tax charges increased from US$84 million to US$117 million in 3Q22. The effective tax rate in 3Q22 was 39.4% compared to 42.0% in the prior period, mainly due to profit mix changes amongst the OpCos. The effective tax rate is higher than the weighted average statutory corporate tax rate of approximately 33%, largely due to the profit mix between various OpCos and the withholding tax on dividends by subsidiaries. Consequently, profit after tax shot up 148.7% YoY to US$ 180 million, which was largely due to higher operating profit along with lower net finance costs. The company’s earnings per share jumped to 4.1 cents in 3Q22, up from 2.5 cents in the prior-year period.
   
• The company recorded a 24.7% growth in underlying EBITDA in reported currency (+26.8% in constant currency terms) to US$605 million driven by revenue growth of 15.5% and supported by improved operating efficiency, which was partially offset by adverse foreign exchange movements. The underlying EBITDA margin was 49.6%, 273 bps expansion YoY in reported currency (368 basis points in constant currency). Leverage also improved year on year to 1.4x on December 31, 2021, from 2.1x on December 31, 2020. Net cash generated from operating activities increased by 21.9% YoY to US$577 million. Looking at the key operating metrics, the Customer base grew by 5.8% YoY to 125.8 million, with increased penetration across mobile data (customer base up 11.1%) and mobile money services (customer base up 19.6%). The slowdown in customer base growth was due to new SIM registration regulations in Nigeria. However, Airtel Africa successfully added 1.9 million customers in 3Q22 but was offset by the customer loss in prior quarters of FY21, excluding Nigeria the customer base grew by 12.0%. Airtel Africa also recorded an overall ARPU growth of 12.8% YoY (+14.8% in constant currency).

Other key updates:

1. On December 2, 2021, further to the buyout offer announcement of October 4 2021, Airtel Africa announced the completion of the minority shareholding buyback of Airtel Networks Limited, a subsidiary of Airtel Africa plc and a leading provider of telecommunication services in Nigeria. The purchase consideration for the 8.22% minority shareholdings acquired under the buyback was NGN 61bn, equivalent to $147m at an exchange rate of 415.07 NGN/USD. Airtel Africa now holds 99.96% of the issued share capital of Airtel Nigeria.
2. On February 4, 2022, Airtel Africa announced that its 100% owned subsidiary, Bharti Airtel International (Netherlands) B.V., has elected to redeem all of its 5.125% Guaranteed Senior Notes due 2023, aggregating to US$505 million on March 4, 2022, ahead of its maturity in March 2023.
3. On November 4, 2021, Airtel Africa’s subsidiary SMARTCASH Payment Service Bank Limited was granted approval in principle to operate a payment service bank business in Nigeria. The PSB license is required for Airtel to provide financial services in Nigeria, such as accepting cash deposits and carrying out payments and remittances, issuing debit and prepaid cards, operating electronic wallets and rendering other financial services.
4. On November 14, 2021, Airtel Africa’s subsidiary Airtel Mobile Commerce Nigeria Ltd was granted approval in principle by the Central Bank of Nigeria to operate as a super-agent in Nigeria. The super-agent license is distinct from the PSB license; under the super-agent license, Airtel Africa can create an agent network that can service the customers of licensed Nigerian banks, payment service banks and licensed mobile money operators in Nigeria.

Market Reaction: Investor reaction to the solid 3Q21 results was restrained as the stock closed unchanged at N1271, versus a marginal 0.11% decline for the All-Share Index (4/2). Nonetheless, given the tailwinds in the telecom business and the improving business fundamentals, the Airtel Africa stock has appreciated 62.9% since the last (2Q22) earnings on 29/10.

Airtel Africa Earnings Highlight 3Q22

Source: Company Financials, FSDH