Earnings Transcript for AAFRF - Q2 Fiscal Year 2024

Operator: Good day, ladies and gentlemen, and welcome to the Airtel Africa Half-Year Results Conference. All participants will be in listen-only mode. There will be an opportunity to ask questions later during the conference. [Operator Instructions] Please note that this call is being recorded. I would now like to turn the conference over to Segun Ogunsanya. Please go ahead.

Olusegun Ogunsanya: Thank you. Hello everyone and thank you all for joining us today. With me I have Jaideep, our CFO; and Pier with Investor Relations. Let me give you some bit highlights about the last six months, provide a brief update on the strategy, before handing over to Jaideep, who will go on to the financial results in detail. [indiscernible] economic and operating environment has been very challenging in many of our markets. However, we have much conduct other than same considerable progress for the parties which have contributed to a successful operating performance across each of our three regions. Very strong constant currency revenue growth performance, as [app] offset the inflationary pressure on our cost base, resulting in an improved EBITDA margin [indiscernible] to further improve our capital structure. Our focus 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 increase 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 successes. We have navigated challenging operational environment to report, strong promotional performance with sustained customer growth across all our segments, Voice, Data and Mobile money. These are further supported by increased usage across our network, which has given up with almost 10 percentage point in cost currency. This sustained demand for services as desired 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. Risk in the capital structure is a key to keep our team, and we are now well on track to fully repay the HoldCo debt, which is due in May of 2024. And the Board has declared an interim dividend of 2.3% per year. This is of 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 fit profile growth transitions. Our momentum on our sourcing [indiscernible] remains unchanged and continues to be embedded in everything we do. In this slide is what within our performance to the context of the environment we are operate in, and I would like to highlight a few of the key issues and now we are working to mitigate against those challenges. One, consumers still remains impacted by high inflation. However, with our full and transparent offerings, we'll continue to provide value for our customers. Secondly, inflationary pressures remain a challenge for the business. For very strong cost of currency growth, operational leverage, which combined with cost optimization and EBITDA 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 dollars especially across our cost base, we've been able to report margin improvement over the period. Finally, let's find the first liquidity challenges across some of our markets. We remain successful in upstreaming cash from OpCos, putting us in the position whereby we are on track to fully repay the HoldCo debt when due in May of 2024. Let me now give you an update on our strategic priorities and our achievements that led our strategy is working for us. This slide, next slide, captures the key drivers of our future good potential. The demographics of our market that combined with the low level of SIM penetration will continue to support growth in our customer base, which combined with increased usage, we drive very strong revenue trends. And very important, the mobile money journey remains are the very easy across all of our markets and this will follow the growth momentum. As a group, we're very clear what now we're going to capture this growth. Our win-win strategy has delivered, and will anticipate this changing in any way. Additionally, we have executed very successfully and the last '23 consecutive quarters of double-digit revenue, our EBITDA growth as should RV as an organization, we have drive framework and mindset to continue delivering. Pacific growth algorithm on this chart, it shows our operational success has been achieved and also experiences our intentions of momentum aspiration going forward. The growth in the customer base across all segments combined with increased ARPU as increased research is monetized, translates into very strong revenue growth. Operational leverage and cost of optimization drive increased resources for investments during first future growth. They are for any 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, these six pillars, which are designed to cover the good opportunity as a way to transform lives across Africa. Our strategy is clearly working. We will continue to see wins to enhance service software to enable sustained growth, and get value for our stakeholders. This slide shows you the impact of the valuation and in fact it does have longtime value creation of trends. We consider the period our reported currency results have been significantly imported by the change in FX markets in Nigeria. In second quarter, we've been operated fully part of individuation, and our reported currency group revenue declined by 4.7%, with EBITDA down 3.3% as shown in the chart on the left side of this slide. While the scale of evolution is very exceptional, facing FX and headwinds across the market is not new. Our strategy focuses on the ability to drive a strong percent currency revenue growth to limit impact of FX devaluation has on our business. The success of this strategy is to facilitate the performance of the Company over the last five years. By doing constant currency revenues adding by 17% each year, we've been able to report a 10% year dollar growth over the same period, which is in part, enabling 30% growth in reported currency EBITDA. As a result, we continue to focus on long-term strategy, offers strong and sustained constant core revenue growth, which I'll explain in next few slides. You can see demand for telecom services is a key driver of sustained growth. We're supposed to market resolve of the strongest population groups in the world, as well as some of the most usual populations. When you combine this with very low levels of SIM penetration across our markets, it provides a different scope of 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 customer useful these services, and only 40% of our customers actually using data services. Through continued network investment, our [indiscernible] increase further adoption across our footprint. While we continue to see the opportunity for continued customer growth, we also see significant scope for higher usage growth across good voice and data. Over the last number of years, we are seeing this strong growth in workplace and data usage by our customer. These have been driven by a few factors. One, our increased network investment with risk capacity are coveraged across our buckets; two, customize an affordable freeze to drive increased user adoption; number three, our continued investment in our distribution infrastructure to increase customer touch points; and finally, a very low average usage of good data advice services compared to global peers. All of these factors remain very advanced, and we continue to support higher consumption across our network. Now the mobile money opportunity, in addition to the telecom's good opportunity, we're in a very unique position to layer on action growth in the form of mobile money to further a non-shareholder value. Mobile money services is only by driving increased financial nutrition across our 14 markets. New levels of financial education has been one key reason for the 23% average growth in the customer business over the last five years. It's also built enforced by the trust that has been built to the provision of easy-to-use services, with a very strong focus on our delivery of loop. So customers can access their cash with ease as a win in each need. The chart on this slide shows our mobile money solving deployment of new financial acquisition across our many markets. We believe there are four depreciative factors, enabling increased customer adoption of mobile money services. The first one is branding. The second is distribution and the third is [indiscernible] activities, which, in our telecom business, ensures we can simplify the operating process for new customers. And finally, targeting micro transactions in an affordable manner to further support increased transaction value. These factors are up in our strong silica performance, and we continue to enable a sustained level of growth going forward. The next slide summarizes the outcome of resources of the previous two slides of mobile money that I've shared with you. Our 33% growth in the customer base last year, combined with 45% growth in the transaction value, reflects the success of the offering, transiting to a 31% revenue growth. With this level of growth and a very high margin, the opportunity to add additional value above what product in compliance in industry can deliver remains very significant. With this, let me hand you back to Jaideep to discuss the financial results in more detail. Jaideep, please.

Jaideep Paul: 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 million, 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 Nigeria naira devaluation is not fully embedded in half year revenue since the devaluation occurred in mid-June 2023, Q2 fully incorporated the devaluation impact. Therefore, if we apply September 2023 closing rate for Naira throughout the first half of the financial year '24, the revenue would have declined by 5.1%. For the period ended 30th September 2023, the negative impact on revenue for 3.5 month 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 to $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 the 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 30th September 2023, the negative impact on EBITDA for 3.5 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 to $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 points. 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 output. 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 275 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 114 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 43% 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 a 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 onetime 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 costs. As you can see, the finance costs, excluding exceptional items, was higher by $44 million, largely as a result of increased local currency debt in operating entity, in line with our push down 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 '23, 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 the 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 to $825 million for the full year. Returning cash to shareholders through our progressive dividend policy remains one of our 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 initiatives, 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 the last one year, resulting in 70 -- 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 ForEx headwind. During the first half, we paid $127 million of license renewal fee for 2,100 megahertz spectrum in Nigeria, which was higher by $48 million as compared with the spectrum at work in DRC and Kenya in H1 of last year. We continue to focus on strengthening our balance sheet by firstly, reducing our foreign currency data across OpCo and HoldCo. HoldCo debt is due for repayment in May 2024, and we are well positioned to remain the same. Secondly, OpCo local currency market debt increased by $450 million as we continue to execute on debt push down 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 12-month impact of the Nigerian naira and neither devaluation as on debt, the leverage ratio is expected to be between 1.3 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 of day. I'll now hand over back to Segun to conclude the presentation. Thank.

Olusegun Ogunsanya: Thank you, Jaideep. Finally, on this slide, Slide number 30, very few words for me on summary and outlook. As you've seen from our results, our focus has contributed to very strong operational financial performance, and we continue to demonstrate positive developments on nearly every key metric. Our near 10 focus will remain on investing in our network and further expanding our distribution to be closer to our customers and at the same time, build in new services for future growth. Clearly, our results are being impacted by the naira devaluation in Nigeria, but we continue to believe that this is very good of the economy. I will not impact visions in the countries. 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 for your attention today. I would now like to put the floor for questions.

Operator: [Operator Instructions] The first question we have is from Maurice Patrick Barclays. Please go ahead.

Maurice Patrick: Hopefully, you can have you okay. A couple of questions from -- thanks 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 -- sorry, for the full year. You've already shown pretty strong margin growth in the first half. Given the comments you made around Nigeria Energy may be becoming more of a headwind in the second half, I wondered if you thought you can maintain the level of margin growth into the second half that you see in the first half? Or should it be more flattish? And the second question really relates to mobile money in Nigeria, and if I'm not wrong from the presentation report, I think revenues were $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?

Olusegun Ogunsanya: Yes. Thank you, Maurice. You've seen what we've done about the last '23 all quarters, we continue to deliver very strong double-digit growth and our cost efficiencies continue to expand our EBITDA. Although we don't give a guidance answer for the future, we are very confident that in our operating model, we continue to deliver very strong double-digit growth and at the same time, lead to very strong EBITDA. Specifically in Nigeria, we put a number in place to control costs. Key among those measures we put in place are energy efficiency to use of some electronic equipment, which consume less energy. In terms of taking care of towers, we've put in lithium batteries and solar panels working with our powerful partners. We're also looking at more grade connectivity to reduce independence on their power, on Bizu. We did some transmission rerouting, and we're shifting a number of ties from physical years to digital channels. All these are helping us to continue cost we see in Nigeria. So you see what we've done. We're very confident in our model. We continue to deliver very strong double-digit growth in terms of top line, and at the same time, very decent EBITDA levels. Talking specific about the DSD opportunity in Nigeria, we're very clear in terms of priorities. We want to have a decent customer customer-based policy thinking of monetization that we continue to do to expand the customer base as funding year network. And we also keep on building the very wide acquisition required for monetization. I think it will take a couple of more contactors very decent customer number that will partner generally very good level of monetization.

Maurice Patrick: A couple more quarters before you start monetizing?

Olusegun Ogunsanya: Sorry?

Maurice Patrick: I mean a couple more quarters, yes.

Olusegun Ogunsanya: I can't give any specific indication as to which quarter we're going to start monetizing. In terms of broaden the philosophy, our growth strategy was to continue to expand our customer base and also expand network. The numbers are very according in this quarter, and we continue to push all our efforts towards increasing the customer base and expanding the gen network as we created much weather ecosystem in the short term.

Operator: The next question we have is from John Karidis of Numis. Please go ahead.

John Karidis: Thank you very much. Two 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 of 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? And then thirdly, I wonder if there's anything you can score 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 prospects since we last spoke. And then 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 towerco to another, please?

Olusegun Ogunsanya: Very loaded questions. I'm going to start with the first one on upstreaming of cash. Let me -- 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 the new one country. In the half year, we both stream over $300 million from the many countries in our portfolio. So that is worth clear -- for a few of size. And secondly, it didn't last a couple of months, and last couple of months. Focus in a year has been sourcing dollar, not on upstream dollar because you do have that being a number of liabilities to satisfy, so that has been 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 assets and foreign exchange, but part of our business has been very minimal, given the fact that we've got this in other countries where we able to upstream millions amounts of money to H2. As I speak now, we've got enough money to pay off the debt at H2, the $550 million that is going to more mature May next year. I'm not sure the strength I mean of our portfolio that we're go to use [indiscernible] portfolio to upstream and money. The question on [indiscernible], I will let Jaideep. Jaideep will take a question not get this. The gains is obviously between 1 billion and 8.25. Once I complete your last question, I'll give the mic to Jaideep to speak about the CapEx. The IHS and HTC equation, I mean, we -- I said the balance of power is shifting from towercos to telcos now. We do have I mean three main towercos work with IHS, HTC, in various countries and various content portfolios. And the lines are due at various times a day. We continue to evaluate each of the contracts and we do what is best for our business at material time in future. I think what MTN is done is probably an indication to that fact that balance of power is not constant. It keeps changing. And we continue to explore whatever we need to do to maximize the win to be open by constant shift in tenancy at various towercos. Finally, on the Kenya Western, Kenya is one of our best performing markets, and Nigeria’s market is doing very, very well. More work required to be done on the mobile money business, where the business clearly dominant. But when you take away the mobile money business and focus on the GSM only, I've seen any considerable progress in the last couple of years. And this is that's the reason why this is going to continue in Kenya, which is one of our largest markets. Jaideep, about the CapEx?

Jaideep Paul: Sorry, John, what was the CapEx question?

John Karidis: Yes. 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 or fee or you used to, but you've stopped doing that. I just sort of wondered whether you might give it on request at least?

Olusegun Ogunsanya: So you're asking for CapEx by region.

Jaideep Paul: Firstly, let me clarify, $312 million CapEx, which is spent in H1 includes GSM, mobile money, IT, PSB, everything put together. That's a total CapEx, which we spend, which includes the GSM, mobile money, sensor distribution, ASB and IT. So what is breakup you need?

John Karidis: I understand. Yes, I'm just trying to figure out operating cash flow by region. So we have the consolidated EBITDA in Nigeria, for example, but we don't have the consolidated CapEx in Nigeria. We only have the wireless service. Anyway, I'll take that off-line.

Pier Falcione: We take it off-line, John, because we don't break up CapEx on airtime by region. So...

Jaideep Paul: But I can give you three numbers. You can note down. In Nigeria, total CapEx is $12 million for the first half, East Africa $111 million and Franco $80 million. That takes us to total $312 million.

Operator: The next question we have is from Madhvendra Singh of HSBC. Please go ahead.

Madhvendra Singh: Just a few questions from my side. Firstly, a follow-up on the diesel cost and its impact on the Nigerian margins. If you could quantify how much of the margin uplift was because of lower diesel cost, that would be quite helpful. And then secondly, you talked about the FX revaluations and so on from Nigeria. I'm just wondering 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 is 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 the -- 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 in to the bill now?

Jaideep Paul: Sorry, an update on what?

Olusegun Ogunsanya: The price increase in Nigeria. Let me start with the last question about the price increase in Nigeria. But it's the important for me to explain our philosophies you very clearly. We really rely on usage increase to drive revenues, we rarely use price. Of course, if there is a [indiscernible] for pricing dilutive pricing, but our growth algorithm doesn't depend on pricing per se to offset the part of inflation. In line in much faster in increasing usage levels, price, voice, price, data, when I ever for buy money consumption. And also we've done in each of our 14 on in the last quarter, in the last many quarters. So if there is an opportunity for pricing, we would take it. But despite the fact that there no huge increase in pricing in Nigeria, with money to deliver 20% of 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 increase usage of data, usage of voice, usage of a very nascent ESD opportunity to increase revenue, and as we continue to engage the regulatory authorities on the price adjustment when required. Your second question is on FX repatriation. Yes, it's been impacted like this comment, right? The willing buyer, willing seller scenario, but we do not shy of investing in Nigeria. We launched 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 plan for Nigeria. We continue to put quality in our 4G network. We had a fire by infrastructure. We put in a new data center in Nigeria. So yes, the best in terms of liquidity, but we've not still 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?

Jaideep Paul: 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 -- is on price, impacts us about $4 million to $5 million a quarter, every 10% change, which is roughly about 0.3% to 0.4% of overall Airtel Africa EBITDA margin. So, that's a 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 one percentage point benefit which we bought 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. Thank you. Does it answer your question?

Madhvendra Singh: Yes, yes. very much for your answer that is very helpful.

Operator: The next question we have is from Rohit Modi of Citi. Please go ahead.

Rohit Modi: Most of them have been answered. Just two questions. Firstly, on Francophone. The growth rate, particularly in Francophone, has declined. Now I know in the past, you mentioned that it's been underinvested in 4G and you are investing and catching up on 4G. What's the situation now why the growth rate has been declining and Francophone countries? Secondly, I just wanted to understand your contract with AMT. The towers where your anchor tenants, do you get any kind of discount of your additional tenancies coming in on your lease rates?

Olusegun Ogunsanya: On the Franco countries, we continue to invest in 4G network in those Franco countries. In the last quarter, in the last second half year, we've added a number of additional developments in a few of the countries in Franco, and those political developments affected our business. We, more or less, I mean, of those political developments now, and we see our business return to normal levels of good. For years, we did have an impact from political developments in two other countries in our portfolio in Franco Africa, and this development in Africa business in the last half year. For the Towerco, Jaideep, do you want to?

Jaideep Paul: Yes, 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.

Operator: The next question we have is from Oluwaseun Arambada of FBNQuest.

Oluwaseun Arambada: My question will be around the reference exchange rates for conversions. I think your report says, the references rate was that of closing as on June 30th. But to my mind, I would expect that the conversions rates would probably the average period, see, from April to September. So I just want to know what goes in transforming our reference exchange rates as it pertains to Nigeria?

Jaideep Paul: Okay. So let me answer that question. So what happens is when you come to the P&L, 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 an 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 state 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, that's 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. And the spot rate of 30th June was 752. That's why if you recollect, we had $471 million of impact, which was shown in the exceptional item as a part of the finance chart. So 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. So the P&L 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.

Operator: The next question we have is from Curtis Schacht of Sustainable Capital. Please go ahead.

Curtis Schacht: 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. It would 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 is that perhaps linked to the shift and bargain power with the tower companies that you mentioned earlier on the call?

Jaideep Paul: Sorry. Can you take that again?

Curtis Schacht: Lower OpEx versus the currency OpEx.

Olusegun Ogunsanya: Yes, Jaideep?

Jaideep Paul: So currently on at an overall Africa level, if you take our dollar paid OpEx, it would be in the range of 7 -- between 7% and 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 paid operating expenditure so that this impact is not very significant. And that's what you can also see in our EBITDA margin. That's why our EBITDA margin, we have been able to sustain not much impact on the -- in the margin, because we have a very little left now on the dollar base OpEx. What -- where you see the impact of maximum coming is wherever we have either a dollar loan or a part of finance fees obligation, which is dollar paid. Payable in local currency, but it is dollar paid. So dollar loan or derivative and finance this obligation, the portion which is dollar pay, 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. So that's what we have to restate it and that's why the impact is what you have seen when naira devalued from -- to 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. So this is where the impact, what you see in the P&L, the liability restatement. But in the overall P&L up to margin level, our impact is very, very less or little at this moment. But we continuously work on even to ensure that, that 9%, 8% -- 7% to 9% also keeps coming down. And whenever we are able to source dollar, we will pay the foreign currency debt as quickly as possible. So that for the devaluation risk is mitigated.

Curtis Schacht: Great. I mean, perhaps as well, if you could just expand on when mentioning the shift in power from the talks to the tower companies? Perhaps just if you can comment how that -- how you see that playing out in the future? I mean, will it result in low lease rates or -- just trying to get a sense of how the market will shift going forward.

Olusegun Ogunsanya: In terms of our what?

Jaideep Paul: What we shift the power from.

Olusegun Ogunsanya: Look, the construct of the towerco contract, I mean, differs from one telcos to another telco. It depends on where you start with, whether you sold your towers to the towerco or just I mean just put lease agreement between towerco. So depending on the structure of the contract, there are -- route can take when the contract expires, and I believe one of our competitive exercise, I mean, is right to change their name, from one towerco to another towerco. What we continue to do is to look at the construct of a contract, to see whether we can move in or the sales currency from a current soft currency or prevent is to move as much as possible of the rent up from the dollar into local currency. We continue to do this while premier is also to continue to share the impact of the increase in price of diesel. We continue to work with the towerco's office. We also for ways of changing from a fusing to renewable use more but we use more solar panel. We continue to work with the towerco now to really have the basis for sharing the cost of this investment in order to reduce the operating spend. So there are various demands that can be pulled, and each one depends on the particular circumstance of the telco and the towerco. So, it's not one cut for every towerco and every country continuing to apply depending on the circumstance we are in the country.

Operator: Thank you. We have no further questions on the conference call. And I would now like to hand over to any webcast questions.

Pier Falcione: So Segun, one question from the web. If you could expand a little bit on what can be done in commercial operation in Nigeria to offset the recovery impact from the naira devaluation?

Olusegun Ogunsanya: There are two things that are positive. One is continue to grow our top line. We continue to do a very strong double-digit. The second one is continuing to watch your operating expenses. Jaideep has explained how we move most of our OpEx lines from foreign currency in local currency. In Nigeria, that's 7% of our OpEx are in foreign currency. So, we are more or less protected against the currency changes. The areas where we are very difficulty, one, in terms of CapEx to be seen in most of the capacity used to as funding network. We have these abilities to pay in local currency, but these are tied to the dollar. And finally, some of the foreign currency debt, which to really make sure that CapEx letters continue to supply equipment to us, those are fairly more difficult to address. In terms of the above EBITDA being, it was really contained part of the currency devaluation on EBITDA, probably EBITDA, which is where we have the finance costs, slightly more difficult, given the fact that we have to continue to pay the vendors. I am a little slowing down on our investment in Nigeria.

Pier Falcione: Thank you. And a few questions now on the naira devaluation, which I'll try to summarize. So if you can summarize the different components of the naira devaluation, EBITDA and on finance costs, which comes from the valuation of the foreign current stabilities in Nigeria, and including why the impact on EBITDA is high and revenue is higher today compared to June.

Jaideep Paul: Okay. So, this is -- you are referring to the sensitivity of Nigeria?

Pier Falcione: Yes. How does it work? So when naira devalues how it affects certain EBITDA?

Jaideep Paul: So as I explained a couple of questions back. When we convert the P&L, we convert it based on the average rate and the -- both the revenue and margin EBITDA, operating profit, everything gets divided by that average rate. So -- while you see that there is a -- we have given the sensitivity that if we take the full year impact based on the 30th September rate of Naira, the full annualized impact is roughly about $900 million to $950 million drop in the revenue line item, and about $400 million to $450 million, which is roughly about percent of the revenue drops that comes in the margin. Now -- but the margin percentage continue 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. So, that's one part of it. And full year impact, while 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. And then in June, we started the full month with 464 then it went down to 752. So, the average rate for June was coming to some 500 something. Then what happened, 752 further drop to 776. But the average rate for quarter two is much lower -- much lower impact, because the average of 752 and 774 is about 760 something, 761 or something. So 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 naira doesn't devalue. So if it's continuing at 774. But Quarter three and quarter four, we will still have a denominator, which is 774, or if it further devalues then the average rate will change. So that is the sensitivity which we try to give based on the full year number, based on the current rate, that full year impact is about $900 million to $950 million of revenue drop. And million $400 million to $450 million of EBITDA drop. The impact on the -- of the same -- the large part of the dollar-denominated liability restatement has already happened. So that -- 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 financing expense if the naira continues to be at 774 or 775 and the dollar liability also, by and large, remain at the same level. No further impact in Q3, Q4. I hope I've been able to explain it's a complicated subject.

Olusegun Ogunsanya: I think perhaps you can give a broad overview of what type of currency we have.

Jaideep Paul: So, we have a dollar debt. We have to take last two years some dollar debt to cater to the CapEx spender. We have a dollar debt. We have a lease liability, and we have creditors. So all put together, we have roughly about $780 million to $800 million of dollar liability in Nigeria as of 30th September. So, those liabilities have to be -- had to be restated, and that's what you see that impact.

Pier Falcione: Thank you. And probably the last one, Segun, is around -- 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 behavior in these two markets, if any?

Olusegun Ogunsanya: East Africa is very much market for mobile money after, after zero percent in 10 years. So we should not be surprised that -- we are very much of the mobile money operations in East Africa. Our operations in Uganda, Tanzania, Zambia, Malawi, we are head of operations in our other parts of opportunity, mainly because of the culture in the mobile quality in East Africa East Africa for payments, for transactions and a lot of financial progress have been put on top of the traditional money opportunities in East Africa. In French, Africa, Franco Africa, we started at [indiscernible] not only -- also all the telcos have started and did mobile money services in Franco. So very at least, it is a million number of countries are the levels of mobile money penetration now. And we have such low levels of mobile money penetration, so basically cash-in, cash-out, may be using wallet for recharge of telephone wallet. So that's where we are now. So the key difference is level of maturity. In East Africa, [indiscernible] financial services have been above. Loans are fairly mature, insurance products, cell products have been sold using a mobile money wallet, which is really not available in French speaking countries given that mobile money is just emerging in those countries.

Pier Falcione: Thank you. And there was a question on PSB and price increases synergy, which we've already discussed. So we have no more questions, operator, and we can close the call. Segun, if you have any closing remarks.

Olusegun Ogunsanya: Yes. Thank you very much. Just to reassure everyone that this kind of -- our business, I mean, it is really great. We've delivered a set of results despite the very challenging region environment. In constant currency, we've grown revenue of almost 20%, voice revenue of 12%, data revenue of 28% and mobile money revenue of 21%. We expanded our margin by almost 60 basis points in constant currencies, obviously, reported currency. All the metrics are pointing to right direction. It just shows that our trade is working, and I thank every one of you for joining us this afternoon. Thank you.

Pier Falcione: Thank you.

Jaideep Paul: Thank you.

Operator: Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect your lines.