FSDH Initial Reaction: Airtel Africa Plc 3Q24 results 
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February 1, 2024/FSDH Research

Key Performance Highlights:

• In 3Q24, Airtel Africa reported revenue of US$1,238 million, an 8.3% YoY fall in the reported currency, reflecting the continued impact of the Nigerian naira devaluation, further affected by Malawian kwacha devaluation. However, the Company recorded a 21.0% YoY growth in constant currency terms in 3Q24, with all segments maintaining double-digit constant currency revenue growth. Mobile services revenue grew by 19.3% in constant currency, driven by voice revenue growth of 10.7% and data revenue growth of 29.4%. Mobile money revenue surged 33.4% YoY in constant currency, with reported currency revenue growth of 17.2%. Furthermore, looking at regional performance, East Africa (+6.4% YoY, +25.3% in constant currency) led the revenue growth by region, followed by Francophone (+13.3% YoY, +10.6% in constant currency), offset by Nigeria, with the revenues falling 34.1% YoY (+24.7% in constant currency).
   
• The network operating expenses declined 16.7% YoY to US$225 million, while the License fee also decreased 9.2% YoY to US$59 million in 3Q24. On the other hand, Sales and marketing expenses increased 4.8% YoY to US$65 million in 3Q24, while the employee benefits expenses edged up 4.1% YoY to US$77 million. Access Charges decreased by 28.7% YoY to US$72 million, while the other expenses grew 25.0% YoY in 3Q24 to US$135 million.
   
• The operating profit declined 8.5% YoY (+24.1% in constant currency terms) to US$408 million in 3Q24. The reported currency EBITDA declined by 8.3% YoY (+23.3% in constant currency) in 3Q24 as the full impact of the Nigerian naira devaluation in June 2023 was incorporated. The growth in constant currency EBITDA was led by revenue growth and supported by continued improvement in operating efficiencies, which more than offset rising diesel prices, ongoing foreign exchange headwinds and inflationary pressure. However, in 3Q24, the net finance costs jumped 126.7% YoY to US$365 million, primarily due to US$214 million in derivatives and foreign exchange losses pertaining to the Nigerian naira devaluation.
   
• The massive derivative and FX losses impacted the Company’s profit before tax that came in at US$43 million in 3Q23, down 84.9% YoY. Moreover, the effective tax rate was 65.1% in 3Q24 (3Q23: 32.3%), largely due to profit mix changes amongst the OpCos. Ultimately, the Company’s profit after tax was down 92.2% YoY to US$15 million in 3Q24 compared to US$193 million in 3Q23. Moreover, the loss attributable to the company shareholders came in at US$6 million compared to US$172 million profit in 3Q23. Resultantly, the Company’s loss per share came in at 0.2 cents per share in 3Q24 versus earnings per share of 4.6 cents in the prior year period.
   
• The Company reported a US$182 million capex in 3Q24, higher than the prior year period (US$147 million) and maintained the full-year guidance between US$800 million and US$825 million. Moreover, the Company’s leverage marginally improved to 1.3x at the end of December 2023 (December 2022: 1.4x) despite the foreign exchange impact on EBITDA due to the Nigerian naira devaluation. The remaining debt at HoldCo is US$550 million, falling due in May 2024. Cash at the HoldCo was US$560 million at the end of 3Q24, and the Group is well positioned to repay the HoldCo debt when due fully.
   
• Looking at the key operating metrics, the Customer base expanded 9.1% YoY to 151.2 million, with increased penetration across mobile data (customer base up 22.4%) and mobile money services (customer base up 19.5%). Although Airtel Africa recorded a 16.3% YoY decline in ARPU to 2.8, constant currency ARPU growth was up 10.4% YoY, driven by increased usage across all segments.
   
• Other Updates:

1. The Board intends to launch a share buy-back programme in early March 2024, with the purchase up to US$100 million worth of the Company’s shares over 12 months.
    
2. On 2 January 2024, Airtel Africa plc announced the retirement of Chief Executive Officer Olusegun “Segun” Ogunsanya and the appointment of Sunil Taldar as Chief Executive Officer (CEO), who joined Airtel Africa in October 2023 as Director – Transformation. Following a transition period, Sunil Taldar will be appointed to the Board as an Executive Director and assume the role of CEO on 1 July 2024.
    
3. In December 2023, Airtel Africa launched Nxtra by Airtel (“Nxtra”), a new data centre business. The Company aims to build one of Africa’s largest networks of data centres with high-capacity data centres in major cities located strategically across Airtel Africa’s footprint, complementing its existing edge sites.
    
4. In December 2023, the Nigerian Communications Commission (NCC) informed Airtel Nigeria, in an industry-wide directive, to undertake full network barring of all SIMs that have failed to submit their National Identity Numbers (NIN) on or before 28 February 2024. However, Airtel Nigeria reportedly does not have a significant number of customers generating material revenues who have yet to submit their NINs for verification.

Market Reaction: Investor reaction to the 3Q24 results was muted as the stock closed unchanged at N2,000.10 versus a 1.63% gain for the All-Share Index on 1/2.

Airtel Africa Earnings Highlight 3Q24

Source: Company Financials, FSDH