Airtel Africa Plc (AAF) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to the Airtel Africa Results Presentation for the Year Ended March 31, 2022. [Operator Instructions] Please also note that this event is being recorded. I would now like to turn the conference over to Mr. Olusegun Ogunsanya. Please go ahead, sir.

Thank you. Hello, everyone, and thank you all for joining us on today's presentation and conference call. I'll first cover the highlights and then hand over to Jaideep, who is going to take you through our financial results for the year. And after that, I will take you through some of our strategic and operational developments before we then open the floor for your questions. If you turn to Slide #3 is our summary of our performance. With our continued strong revenue growth, our underlying EBITDA margin expansion and a strengthened cash generation, we have not only delivered financially, but we have also delivered strategically, operationally, and sustainably, and I'm going to talk to these on Slide #4. Financially, I'm going to have Jaideep talk through the details, but at a very headline level, we continue to deliver very strong revenue growth. Underlying EBITDA margin expansion, which is now at 49% and very strong earnings per share growth. As we do this, we continue to strengthen our balance sheet and improve our leverage position now 1.3x, at the same time, reducing our foreign currency debt at OPCO level. With very strong financial improvements and output of our continued strong operational developments as we continue to expand our customer base, growth in ARPU by driving usage and invest in our network with almost 90% of our size now on 4G. All our service segments, mobile money and data continue to be our good engines with mobile money transaction alone reaching $64 billion this year. Strategically, the highlight is our receipt of a full PSB license for us to develop our mobile money services in our largest operation in Nigeria. We have also brought in $550 million of investment into the mobile money business. We bought out minorities in Nigeria, and we've completed towers in Tanzania, Madagascar, and Malawi generating gross proceeds of $284 million. In addition, we have bought additional spectrum in Kenya and Malawi. On sustainability, which has always been at the core of our business, we are fully executed our strategy with ambitions, goals and commitments for our business, for our people, our community, and the environment. Sustainability underpins our 6-pillar corporate group strategy. On Slide #5, we have shown our businesses delivered against 6 key objectives from mobile service revenue to dividend payout. And now you can see the tracker or now deliver against all of the 6 key objectives. With this very brief introduction, I'm going to hand over to Jaideep to take you through our financial performance for the year. Jaideep, please?

Thank you, Segun, and good morning and good afternoon to all of you. Let me start with the key financial highlights. In Slide 7, overall terms, we have delivered a strong set of results for financial year 2022. We continued our revenue growth momentum and our EBITDA margin expansion. Full year revenue was $4.7 billion, and underlying EBITDA was $2.3 billion. Revenue growth for the full year was 23.3% and underlying EBITDA growth of 31.2% in constant currency. Underlying EBITDA margin improved to 49% for the full year. That's about 3% improvement from prior year. Earnings per share before exceptional items almost doubled to $0.16. Our balance sheet position has continued to improve and now our leverage ratio improved to 1.3x from 2x to prior year -- in the prior year. The Board has recommended a final dividend of $0.03 per share. Therefore, the total dividend for full year will be $0.05 per share. Coming to Slide #8. Revenue in Nigeria grew by almost 28%, supported by both customer base growth of 5.8% and ARPU growth of 33%. Customer base growth in Nigeria was impacted by the NIN/SIM regulation during the first half of the year, but returned to growth in this region in the second half of the year, adding about 4 million customers during H2. Underlying EBITDA grew by 30% with a margin improvement of 114 basis points, and the margin now stands at 55%. In East Africa, the revenue grew by more than 22% with an EBITDA growth of 32%. Underlying EBITDA margin reached almost 50%, an improvement of 331 basis points in constant currency. In Francophone Africa, the customer base grew by almost 16% and the revenue grew by 17%. Underlying EBITDA grew 28% with a underlying EBITDA margin expansion of 337 basis points to 41%. Coming to Slide #9. Performance of our key services, voice contributed to half of the total revenue and grew by 15%. Data contributed 32% and mobile money almost 12%. Both data and mobile money services are growing about 35%. As you can see, our voice revenue growth of 15% was driven by growth of both our customer base and ARPU. Similarly, our data and mobile money revenue growth of about 35% was driven by both the customer base increase and ARPU growth. Data ARPU growth was mainly as a result of increased 4G penetration and 4G data usage per customer increased to 5.5 GB per month, much higher than our total average data usage per customer of 3.4 GB per month. Mobile money ARPU growth of 12% was driven by growth of cash in, cash out transaction, merchant payment, B2B transfers, and mobile service recharges. Coming to Slide 10. This shows the incremental revenue contribution from our key services. Revenue in reported currency grew by 21.3% while in constant currency growth of 23.3%. The differential was due to currency devaluation mainly in Nigeria and Malawi offset by appreciation in the Zambian kwacha and Ugandan shilling. All our key services segments of voice, data, and mobile money contributed to the revenue growth. Coming to Slide #11. Our underlying EBITDA grew by 29% in reported currency and absolute EBITDA for the full year was $2.3 billion. Currency devaluation had an adverse impact of $26 million due to devaluation in Nigerian naira and Malawian kwacha, offset by appreciation of Zambian kwacha and Ugandan shilling partially. The underlying EBITDA margin improved to 49%, an increase of 296 basis points in constant currency. The improvement in margin was led by both revenue growth and improved operational efficiencies and disciplined cost control. EBITDA flow-through for the period was more than 60% during the last financial year. Coming to Slide #12. Our mobile money customer base grew by almost 21%, mainly in the East African market. Mobile money customer base penetration reached 20.4%, an increase of 2 percentage points. The total transaction value increased to more than $64 billion, driven by an increase in usage per customer by almost 14% and also the customer base growth of 21%. Underlying EBITDA was $270 million, growing by 38% in reported currency and by 34% in constant currency with a EBITDA margin of nearly 49%. Coming to Slide 13. Our cash flow generation for the full year was $622 million, largely as a result of our improved EBITDA performance and higher intangible CapEx in the prior year, partially offset by increased cash taxes resulting from higher operating profit. Slide 14. Our capital allocation policy remains unchanged. As mentioned earlier, our priority is to invest in the business and at the same time continue to aim at further strengthening the balance sheet. CapEx for the full year was $656 million, in line with our guidance. CapEx guidance for the next year is slightly increased to now between $700 million and $750 million, including the cost of now rolling out of our PSB operation in Nigeria. Our leverage ratio improved to 1.3x from 2x in the prior year. During the year, we repaid $915 million of bonds in May '21. And in March '22, we repaid $505 million of bond at a year earlier than their March '23 redemption date. We are able to make these repayments because of our increased cash generation and by use the proceeds from Airtel Money minority investment and tower sales. As mentioned earlier, in the first half of the year, the Board has approved a revision to our dividend policy with a new base dividend of $0.05 per share for financial year 2022 from the earlier base dividend of $0.04, with a progressive dividend growth of mid-to-high single-digit percentage in the subsequent years. The Board has recommended a final dividend of $0.03 per share. Therefore, the total dividend for the full year will be $0.05 per share in line with our dividend policy. Slide 15. We continue to strengthen our balance sheet by firstly, reducing our leverage now at 1.3x of EBITDA; secondly, reducing our foreign currency debt, especially at holdco, we have repaid total bonds of $1.4 billion during the year as a result of strong cash upstreaming across our OpCos and proceeds from minority investment in mobile money and tower sales. Over the last 4 years, our holdco debt was brought down to $1 billion from $2.7 billion, the remaining holdco debt of $1 billion falls due in May 2021. And thirdly, increasing our debt at OPCO level and whenever possible in local currency, our OPCO market debt increased by 35% to nearly $1.3 billion. The total weighted average interest rate was 5.6% versus 4.9% in the prior year, largely due to the repayment of the Eurobond in May 2021, which carried a lower interest rate of 3.4%. EPS -- Next slide, EPS, earnings per share before exceptional items almost doubled over the prior year to $0.16 from $0.082. This increase in EPS was largely contributed by the expansion of operating profit, partially offset by the increase in tax. We have made significant progress in delivering against our strategic initiatives. During the year, we sold approximately 2,600 towers across 3 OPCOs with total gross proceeds of $284 million, out of which we have received $240 million so far. Secondly, we also received proceeds of $550 million from our investor in Airtel Money business. In Nigeria, our buyback of 8.22% of minority shareholding has been completed successfully. And as you can see on the right side of the slide, there are several future opportunities that we are currently working on. Thank you very much. And now I will hand over back to Segun for the strategic and operational update.

Thank you, Jaideep. I would now like to remind you of the tremendous opportunities we are addressing. If you turn to Slide #19. We've united the opportunity presented by our markets. Fundamentally, the population and industry dynamics of our markets continue to furnish us with huge opportunity. We have some of the strongest population of [indiscernible] in the world and the most future populations with very young people continue to be key drivers of digitalization. Most young people, digital first and digital only. They consume data only on mobile devices. Moreover, our markets are very low risk of customer penetration of both mobile voice and mobile data services compared to more developed markets, but also when compared to emerging markets. If you turn to Slide #20, it shows the opportunity for greater usage by our customers. Customer usage levels in our footprint for good voice and data remains significantly lower than those of developed markets and in many emerging market territories. Banking penetration levels continue to be very low, affording us an opportunity to help governments to drive financial decision in the countries through mobile money solutions. If you turn to Slide #21, we're very familiar with this slide. Our 6-pillar strategy remains fundamentally unchanged. It has been continued to deliver strong double-digit revenue growth across our regions and services. Since we last viewed this slide, we've added 2 new segments. One is on digitalization. Our focus on digitalization and capacitive transformation of our products and services and our internal systems and processes as well. And this will increasingly function as a catalyst or an accelerator for each of our 6 strategic pillars and underpinning the Group strategy is sustainability, describing a very strong commitment to what drives sustainable development and action as a responsible business. We have a slide on this in a little later in the presentation. If we turn to Slide #22, we're going to speak to our network pillar. We've continued to add new network sites, announced 3,400 New Year with 1,400 of these in rural areas. We have also maintained a very strong focus on modernizing and increasing capacity with almost 90% of our size now on 4G, and our overall data capacity of the network increased by over 40% to 16,900 terabytes per day. Our network of time has got into over 99.5% and our network now covers 11 million more people than we did last year. In [indiscernible], about 10,000 kilometers of fiber, increasing our total fiber footprint to about 65,000 kilometers. If we turn to Slide #23, issues on network strategy in action in one of our contracts in Uganda, where we recently got an award as the fastest mobile network by the 2022 Mobile World Congress. It is a function of our nationwide 4G network availability, which now covers over 90% of the population and also a very extensive fiber rollout in Uganda. If you turn to Slide #24, let me speak about distribution, which is also one of our key pillars of our strategy. Here, you can see how we have continued to assess both our exclusive and nonexclusive distribution... [Technical Difficulty]

Ladies and gentlemen, we do apologize for this. We will be getting the presenters back online shortly.

I think I got caught off on Slide #24, where I spoke about distribution, and I was talking about what we did in DRC when we got cut off. So let me just start on Slide #25. Slide 25 shows our DRC case study. We have seen distribution pillar strategy in action. DRC is a very large country. The largest balance in Africa, but very low population densities. And we have vast distances, can be very disruptive towards customers' abilities to physically engage and transact. We therefore, choose to establish a good year that no customer, none should have to travel more than 1 kilometer to use any of our services. We can achieve this by submitting a kiosk for every 2,500 people and Airtel Money branch for at least 10,000 people. We've already grown our customer admission outlets in DRC by 36% this year and a number of Airtel Money branches has increased by 67%. This focus on distribution has helped or to drive up DRC customer numbers by almost 21% this financial year. If you move to Slide #26, we speak about our data pillar. And our network design, using single RAN technology with increasing fiber rollout has kept our superior network with significant digital capacity and the flexibility to further expand with only limited marginal investments. We have generally invested in 4G ahead of our many peers. And across the group, almost 18% of our size are now for 5G-capable, up 11% over the previous year. When combined with our smartphone packages, these measures are there to drive both data customer base growth of more than 5% and customer data usage by almost 50%. Kenya in East Africa is a great example of our data strategy in action. You can see on this slide, Slide #27, 26% in the number of 4G sites coupled with 1,000 kilometers of additional fiber, therefore, double our network capacity. And together with further improvements in our distribution, this helps also drive our data customer usage of by about 57%. And our Kenya data revenues are grown by over 30%. Moving on to Slide #28, this speaks of mobile money strategy. Lack of traditional market infrastructures in most of our markets in Africa and very long distances that users struggle to find a branch means that the number of customers who are able to access traditional banking services is far lower than anybody numbers who have bank accounts. Our focus, therefore, is likely on expanding the distribution network to make it easier for customers to both digitize and get access to their cash and to transact where necessary. Accordingly, you can see that we've grown our exclusive channel numbers, those are exclusively owned by us, by over 44% this year, and multi-brand agents by almost 42%. This goes as to the customer who are able to drive uptake by almost 21% to our 26 million customers by the end of the financial year. And this as helped to drive digital cost reduction with customer transaction values up by nearly 14% and a commission leading to total transaction value growth of 37% for the year to over $64 billion. Next slide speaks more on our mobile money business. The key to mobile money remains the provision of our cost services. In a assured manner, the fast builds trust through good ease of use, the accounts have been physically close to our customers and to the reliability that accounts with those touch points are in a short fluid all of the time. So customers that we can access with cash with relative ease when they choose. Alongside this call is our developing ecosystem of financial services for emerging and most obscured services. It is very important for us to develop this ecosystem now to solve our more [indiscernible] customers whom we already demand are now the smartphones and [indiscernible] as well as to be prepared for the broader transition of the market in this direction. While many African markets are way ahead of other countries in terms of their use of mobile money, our portfolio markets, inclusive mix of penetration levels, indicating significant remaining potential for us to bring new customers onto the platform. We have been able to increase mobile money penetration in nearly all of our markets. In 4 countries, we have penetration rate of over 50%. And there are several more where we believe we can significantly grow penetration. Excluding Nigeria, where we just got the license, the overall penetration rate across our mobile money market is now 31%. And with the new PSB license in Nigeria, we should commence operations sometime this year. Slide #30, this show the continued evolution of our mobile money ecosystem. With system of digital wallet cash and cashless services as the major source of mobile money revenue, the huge potential for this from increasing our penetration with new customers, but there is also a continued diversification of the business towards additional different solutions and also more subsisted financial services. Slide 31 talks about opportunity from our new PSB license in Nigeria where we are very strongly positioned to deliver against this opportunity. Nigeria is a market of 200 million people, the most populous in Africa and a cash economy of $440 billion with a non-bank population estimated to be more than half of the other population. We already have 44 mobile service customers in Nigeria and more are 30,000 exclusive shops, which have been transformed into mobile money outlets. We are in the final stages of developing our operations, we hire some staff, we establish in distribution lines, develop [indiscernible] of our platforms or by launch around the second quarter of this year. And we hope that the business will begin to make very meaningful contributions to our group numbers in financial year '24. Slide #32 is win with people. In particular, our point out is significant progress we've made in the diversity of [ ASCO ], adding 5 percentage points this year to the level of female representation more diversity. And we continue to value multicultural with 35 different nationalities represented one of the most technically diverse force in the [indiscernible] 100. Now on sustainability. You can see the summary of our sustainability strategy on Slide #33. This has 4 key pillars of how our business, our people, communities and environment and now we have really material topics, which we identify through consultation with many stakeholders early in 2021. It also demonstrates our contribution to 6 of the UN SDG growth, which we believe can have the biggest impact. Our sustainability strategy now on the pace, our group strategy and our well-established corporate purpose of transforming lives. It demonstrates our commitment to developing infrastructure and services that will drive both digital and financial inclusion for people across Africa. We have 9 work streams, each with a goal for a commitment, which aggressively business material topics and enables the group to continue delivering sustainable growth and opposites governance standards. I undertook a deep dive of these work streams in the first half. But let me analyze one development since those results is a unique partnership with UNICEF. We're engaging a 5-year Pan African partnership, providing both financial and income contribution of about USD 57 million, spread over 5 years up to 2027. A purpose is acted rollout of digital learning, through connecting schools to the Internet and internet access to learning platforms across 13 countries in Africa by providing equal access to quality digital learning, particularly for the most vulnerable children, this partnership will ensure that every child can reach their full potential. We're targeting over 1 million children in Africa for this. Finally, we have made tremendous strides in our environmental pillar. In the last few months, with [indiscernible] we expect to publish our pathway to net zero very soon, following -- let me follow by our first sustainability report towards the end of the year. And finally from me, on Slide #34. A few words on the outlook. As you have seen from our results, our financial, operational, strategic, and sustainability fundamentals remain very strong. We continue to demonstrate positive developments on every key metric. From an outlook prospect you, we remain very excited about the long-term opportunities for our business. We continue to build on a strong track record of milestone deliveries. Our net term focus remain on improving our network quality and availability and a foreman distribution to be closer to our customers. These are the further mentors of our business. This year, we have parted focus on ensuring a successful reuse of our Nigerian mobile money business. Going forward, we continue to actively mitigate all of our material risks. And there are many. The world is currently facing increased inflationary pressures for which cannot be totally new, but which we seek to contain as much as possible as we continue to target good revenue growth ahead of the market and further morbid margin expansion for the year. And with that, I would like to thank all of you for your attention today. We're pleased to take your questions. Thank you.

[Operator Instructions] Our first question is from Jonathan Kennedy-Good of JPMorgan.

And congrats on the results. 3 questions from me. Just on the pace of rollout that we should be expecting in Nigeria for mobile money, do we see significant revenues coming through in the second half? And on the cost side, will there be enough revenue to offset costs or will it be margin dilutive? Another question just on your longer-term outlook there. Obviously, Nigeria is higher ARPUs than the remaining regions you disclosed. So just wondering whether we should think about mobile money ARPU is higher than the group average. I think it's currently sitting at about $1.90 for the group. And then finally, on cash upstreaming, can you give us a sense of whether you recently created money from Nigeria? And if so at what kind of exchange rate?

Well, let me start with the mobile money business. We've been preparing for this for the last 2 years, so I can confirm that we're ready for the rollout. Of course, in the early days, revenues would slowly increase. So we wouldn't expect a significant contribution to our revenue in the current financial year. We're going to spend [indiscernible] the business we expect significant performance in the next financial year 2024. In terms of cost as well, remember, we had a very strong foundation upon which we are building our mobile money business in Nigeria. And like I said, we prepared for this in the last 2, 3 years. So I don't expect a significant cost uptick coming from the rollout of mobile money business. We've already developed the IT infrastructure required. We've already rolled out the search infrastructure. We are adding some people. And we expect I mean some material amount to be spent on marketing and a bit on distribution. But both impact is not going to be strong in the bigger context of metrics in Nigeria. I would ask Jaideep to speak about the cash upstreaming. Jaideep, do you want to take that from Nigeria?

Yes. So firstly, we -- as you know that we operate in 14 countries, and we continue to maintain sufficient cash balance and upstream across various geographies, including Nigeria. We have done about $140-odd million of upstream in the past in the last financial year, and we continue to do that in the current financial year. Obviously the cost is slightly higher than the official rate. Normally, the cost comes to around -- between NGN 480, 490 per dollar as a upstreaming cost. I mean, that's a additional cost which we incur.

And in the bigger picture, we have streamed close to $900 million in the last financial year anyway from a number of countries in Africa, some from sale of towers, some from remittances of the profit we've made. And at the holdco we -- not under any stress in terms of cash finances have been able to meet any of our obligations. Yes, the idea is one of our very significant operations, but we continue to mitigate the risk of cash flows from Nigeria by being able to repatriate money from many out of the balance 14 countries we have in our portfolio.

Just a point of clarification. My understanding from your comments is that you upstreamed about $140 million from Nigeria and about $900 million in total from only OpCos, including some asset sales. Would that be fair?

Yes. Yes. So total is in the range of, let's say, between $850 million and $900 million, which included the tower sale -- of tower sale proceeds of about $240 million, and the balance is through dividend and shareholder loan repayment.

The next question is from Maurice Patrick of Barclays.

Just a couple of questions from my side, please. The first one, just on your mobile money momentum. I sort of note the having sort of looked at the orange results. They saw a fairly material slowdown in fact, decline in the mobile money revenues. They cited the impact to wave specifically. Just curious to hear a bit about whether you are seeing any impact of that on your business? And maybe whilst you talk about that, what sort of defensive mechanisms you're putting in place for likely entrants in new entrants would be helpful? And then the second question, if I may, just on the -- I think at the IPO, we sort of talked about $600 million, $700 million, obviously, this year, a bit higher. Is most of the delta about the Nigeria PSB? So I guess, should we expect once you've rolled out the money in Nigeria that maybe CapEx falls back to that $600 million, $700 million level.

Okay. Let me start with the last one about CapEx. We've provided for $30 million in the current full year triples for rollout of PSB Nigeria. It's nice to become part of the capacity. It's about $30 million, we've made provision for in total CapEx of $700 million to $750 million. I will now go to your first question about wave and the impact on our mobile money business. We have a common market where we, I believe is in Uganda. We've got about 8 million customers in Uganda, and we've got thousands of customers. Our [indiscernible] we got unique advantages over the new fintech companies who operate in our markets, and typically that is set aside. One is our distribution infrastructure. We've got the combination of a owned retail outlets and third-party outlets. The owned ones are very unique to us. They work exclusively for us and the numbers are huge. The second thing we have going for is [indiscernible] customer base, get about 120 million customers who use us for mobile services. There are potential customers for mobile money services. That's also unique to us. The third one is an ability to create an ecosystem, an ecosystem of banks, an ecosystem of switches, an ecosystem of technology partners that we rather work with -- they're coming with 120 million, 130 million customers and a very small or very few customers. And finally, the platform that we've created, very unique. We're able to serve the bottoming of the customer who rely on [ USS ] and SMS, [indiscernible] high end of the customer, who work on smartphones with applications. Those quarters clearly distinguishes from fintech companies who enter this space, and it's going to be a lot more difficult for them to back on this unique advantage, especially our distribution outreach with fairly near time. We've developed and delivered a distribution infrastructure accounting a lot more people, but a lot less amount than what most of the competitors are able to do.

The next question is from Rohit Modi of Citi.

Just 2 questions from my side. And apologies in advance if this has been answered and I couldn't hear. I missed it. Firstly, on the NIN registrations, it's been almost a month since [ center ban ]. If you can give more color in terms of consumer behavior you have seen after that in terms of usage of data, data packs for the customers who got the ban on their voice -- outgoing voice. Do you see that still they are recharging for data or you see no use of SIM cards for those customers? Secondly, on East Africa, there has been a small decline in number of subscribers in East Africa. Just can get more color in terms of the business as usual? Or are you seeing any competition in any specific country?

Let me speak about NIN. As some of you may be aware, at the end of March 2022, the government asked us out for any customer we've not been able to attach this meaning, like an identity number to a SIM card, we should buy them from making outgoing calls. This we don't. They still able to use our services for data by SMS, but able to make outgoing calls. After we bring the close to 12 billion customers, we've received NIN from like 4 million of them, 0.6 million of them we received NIN. We've successfully added about $1.6 million of the NI numbers to the SIM cards and it resumed using full services, outgoing calls, data, and SMS, that we've done. We're still working with a large number of customers who have been unable to give us correct NIN or who do not have NIN. What we've done is open a lot of outlets to make it easier for those customers to walk into any of those outlets, present their right identity and get ready for NIN. Of course, the process is not as fast as we like it to be, but we continue to engage all the regulatory agencies in the country to make this a painless exercise for the customers would be not able to attach the NIN to the SIM card. Yes, we see some impact on our revenue. If you're unable to make up going cost of course, it affects overall outgoing voice revenue. But we've also seen a bit of SIM consolidation. We've seen a lot more customers who are transferring their usage to the same card properly registered. So some headwind coming from no NIN and a bit of increase, which is coming from SIM consolidation. We're going to continue to work with all the relevant authorities in Nigeria to mitigate impact of this required regulation, which is meant to ensure security in the country. I think there was a second question on East Africa. In East Africa, we have some headwinds coming from change in the way we register customer in 2 of our countries. We don't give ideas country by country, but sometime in the end of the year, regulators in 2 of our key country change the ways customers are registered, requiring a lot of biometric registration. This affected the ease with which customers register for services, and is to the customer addition process. We fully recover from this. We provided enough devices for customers to do biometric registration. So I can confidently say that I mean, the headwinds that came from this new way from voting 2 of our countries in East Africa we put this behind us as we made progress in Q1.

[Operator Instructions] The next question is from Madhvendra Singh of HSBC.

I have 4 questions. Some of them are quite quick. So time consuming ones. So the first question is on the data revenue growth trends, especially in Nigeria. So just looking at the numbers for the fourth quarter, the growth was around 32%, if I'm right. And when I compare that with what MTN did in the country, it was around 54%, 55%. So just wondering, is there any specific reason why Airtel should be growing slower than MTN in Nigeria on data side? And are you happy with this current growth run rate in Nigeria? And the second question is just trying to understand the CapEx increase for the next year. Is it mostly because of mobile money because I kind of -- I remember you said $30 million is what you're planning to spend on mobile money in Nigeria? And then another question is on the network configuration currently, I could see that now bulk of your data is getting carried on the 4G network. So should we start expecting the 3G network also getting, let's say, phased out anytime soon? And if that were not to be the case, then how much of the voice traffic probably is getting carried on the 3G network versus the 4G network? And a very quick one on the net income side, if you could just remind me about how much was the one-off gains in the quarter and the year.

Yes. I will take some of the questions. And Jaideep would answer to the questions. Let me start with the data revenue in Nigeria. Am I happy with it? No, I'm not happy with it. There is plenty of scope to grow faster. Unfortunately, we had a number of problems in January and February. There were a fiber infrastructure and that affected the data revenue for the first 2 months. We fully recovered from this, and we had a decent growth in March, the last month of the quarter. Of course, the growth we had in March was not sufficient to accelerate our normal growth rate. So that's what happened. We backed my normal trends in Q1, and I'm very optimistic that we recycled about the January, February disruption that came to network challenges. Talking about the CapEx increase, Jaideep would give more color to the CapEx increase. On your third question about network configuration, if I give you a mix of the devices on the network, very top level, about 65% of the devices on the network, they are still 2G devices, so 2G is still very, very important. About 15% of 3G devices, is important, and 20% are 4G devices. Most of the data revenue, the 20% of devices, which are 4G, they are responsible for about 80% of data traffic and about 7% of the revenue. So 3G is there -- is becoming less and less important. Can we completely shutdown our 3G infrastructure? No, because 15% still have devices that are 3G-enabled. So we're still going to continue to ride a 3G network for the next couple of years as we watch the evolution from 2G stream to 4G with a very small termination from the 3G devices. So we see a couple of years to go with our 3G devices and 3G network. And Jaideep, do you want to speak to the net income and the CapEx increase?

Yes. On the CapEx increase, is your question relating to next year?

Yes.

Okay. So next year, as already mentioned, that we have planned for approximately $30 million for the PSB rollout, that's specifically in Nigeria. And we also have additional CapEx planned for all other countries, roughly between $25 million, $30 million. So that's about, let's say, $50 million, $60 million CapEx allocated for Airtel Money. In most of the other countries, it is used in expanding the distribution.

And the one-off gains in the net income?

Yes. So coming to one-off gain, let me first tell you the full year one-off gain. So one-off gain includes Tanzania, Malawi, Madagascar sale of towers. And that's about almost $107-odd million. And then we have prepayment of bond cost, $19 million. Tanzania, we have provided for a consortium-related expenditure one-off $12 million. And we have a settlement of our agreement on account of Kenya's spectrum license. That's about $20 million. So net debt, $60 million has been gone taken into exceptional item above PBT. Then we have Tanzania -- sorry, sale and leaseback of tower related some impact and some gain on account of tax on the Tanzania settlement. So net exceptional item, which has been booked is $62 million in the current full year. And out of which Q4 has got $52 million because, as you know, that Tanzania and Malawi, we have concluded the tower sale in Q4. Therefore, the profit on sale of tower has primarily come in quarter 4.

The next question is from Faisal Al Azmeh of Goldman Sachs.

Just a quick question on my end -- or 3 quick questions on my end. Maybe the first is just on your leverage profile targets. What's the target leverage structure that you aim to achieve over the coming years? And then at what point do you feel you would have room to upgrade your dividend policy? Is it more related to a certain net debt-to-EBITDA ratio? Or do you feel more comfortable to up the dividend once you localize a certain amount of debt at the OPCO level? That's my first question. My second question relates to your margin profile. You've made a meaningful -- meaningfully -- or you've achieved a meaningful uplift in the group's margins over the past few years. At what point do you feel that we've reached a normalized level and the upside would be limited? Or do you still see a room to achieve higher margins on a 2-year basis? And then thirdly, what's the update on the listing of the mobile money business? And any update on that would be helpful.

Let me start with the last one. On the listing of the mobile money business. Last year, in March 2021, when we announced that we're selling down some minority stakes. We mentioned that within 4 years, we're going to do an IPO. That guidance has not changed. We're still looking out 4-year period within which we're going to do, so down only 1 year. So just take that as a guidance. And we're still hoping to add few within 4 years. On the leverage, Jaideep is going to give you more fledge, but we don't have any specific target for leverage anymore. We have some policies and we're going to strengthen our balance sheet. And Jaideep will give very specific steps we're going to take to strengthen our balance sheet. Also on the margin, of course, there is some scope for moderate margin expansion, like I said in my opening statement, given the inflationary environment coming from different prices in different parts of the world, we expect a moderate expansion of margin, but I hand over the mic to Jaideep to give you more flavor. Jaideep, please?

Okay. So let me first give you the broad breakup of this 1.3. So if you look at our net debt table, you will see a lease liability, which is the finance lease obligation because of the IFRS-16 accounting, which we do for all the sites, which are taken. Now this is 0.7x out of 1.3, and this is like a long-term debt for us, and this will continue to grow a little bit every year because we are expanding our network. So every time we put up a site, this lease obligation goes up. And obviously, for the full year, and there is a payment which goes against this FLO. So it's a plus and minus every year. And that's why you see that this is going up because of the renewal of the leases, putting additional sites. Now if you leave that 0.7, which is coming out because of the FLO, effectively, if you look at the rest of the other things, that means we have -- excluding FLO, we have a leverage of about 0.6, let's say, 0.6, 0.7 kind of thing, right? Now I would not be able to articulate any particular target, but I can tell you certain other things and give a color to it. Our whole objective is to strengthen our balance sheet on 2 key focus areas. One is continue de-leveraging our business, which we have done, by the way, from IPO to till now from 3 times, it has come down to 1.3%, which includes this 0.7% because of the FLO. The second is by de-risking the balance sheet through reducing the amount of foreign currency debt and especially at the holdco level, and pull down the debt at an operating unit level. So if you also notice that we have now left to only $1 billion of one bond, which is falling due in 2024 at holdco level. Rest every debt has been pushed down to the OPCO, which gives us 2 benefits. One, as we push down more in local currency, we de-risk our balance sheet from any possible devaluation impact. And the second, we get a tax shield on the interest cost, which is a very significant amount. So both are strengthening our balance sheet and this initiative will continue as we keep focusing. And of course, expansion of margin is the other element, which we'll be looking at. You asked another question on the margin profile and how we are looking at it. As we explained in the past, we follow a very simple model that every incremental increase in the revenue has to have a minimum flow through into our EBITDA margin. And that's a model we follow across. And that's what we have seen for the last 3 years. Of course, we are very conscious about the inflationary pressure as we move forward. But we will continue to drive our EBITDA margin expansion as we progress in the subsequent years through our -- this incremental flow-through model so that whenever there is a, let's say, a $100 increase in the revenue, we should be looking at, at least $50, $55 of flow-through in the EBITDA margin and therefore, expansion of the EBITDA margin. And the dividend policy. Obviously, this is a subject matter of the Board, and I can't comment on that. As you have seen that, as we improved our leverage in last October, Board has reviewed the dividend policy, increased the base dividend by 25% with a mid-to-high growth as we progress in the subsequent years. In appropriate time, I'm sure Board will relook at this. And we will definitely keep you posted as Board relooks at the dividend policy in that time.

The next question is from Evgeny Annenkov of Bank of America.

I have 2 brief questions, please. First one, sorry, is a follow-up on cash upstreaming from Nigeria. You mentioned the $140 million upstream last year. But can you please tell us what was the last time, when was the last time you outstreamed it, and at what rate? And second question, maybe if you can quantify impact on your margins from energy costs rising?

So let me take the second question about the impact of energy costs because energy is almost 20% of our business expenses across all of our goals. Most of the energy is used at sales locations in very distant rural areas where we don't have [ blit power ]. With no blit power the towers rely on the diesel power generators, in some instances on the solar power generators to generate power for the sales side. So we need to just have a good mix of diesel power sites and service are powered by grid and powered by solar. Most of those sites are actually owned by our partners, TowerCos, who are the ones that passed on the cost of energy towards some in the direct pass-through, but most in a manner that the complete increase in fuel cost is passed on to us. So what we continue to do is to engage some of those partners to find ways of saving on energy one through conversion of some of the sites to others, and we don't require a lot of power. In some instance, we also have them to combine the sites to sites that use a lot of green energy, again, no diesel is in both. And finally, in some sites where we're the anchor tenant, as an anchor tenant, the moment the anchor tenant comes, there's discount that we do get on rental. So just I mean comment all these leases together being an anchor tenant meaning, that is second tenant comes, you get some discount. #2, the combustion of some of the size to others as we use a lot of energy. And finally, the cost share formula we have some of the tower cost. The full impact of the energy cost is not passed on to us. So we do have some mechanisms in place to ensure that the full increase in inflation that is coming from fuel, if not I mean, pass on to us. On your first question around the remittance of Nigeria, we did have $145 million like Jaideep mentioned. In the last couple of months, we've done some additional, but I will allow the additional dividend as to what we've done -- what we've done in the last financial year. And we also added around $100 million dollars a couple of weeks ago out of NGN. Jaideep?

Yes. So in April, we have -- we continue to focus on this upstream and April also, we did upstream. I won't be able to give the exact rate because it's a very specific transaction. But we continue to do the upstream and the end of April, we have done another upstream.

I think these are 480, 490 was for the last year or April inclusive?

No, no, no. The April was not inclusive in the last year. This April, obviously, will come in this financial year.

No, I mean the FX rate that you mentioned, it was last year average for NGN 480, NGN 490 in April?

Yes, that was last year average. I won't be commenting on this year rate, but last year average was NGN 480, NGN 490.

The next question is from Ria Quadri from Meristem Securities.

I would ask that the mobile network operators change like increased their tariffs. So I'd like to ask if also Africa is going to implement this analysis to impact on the margins?

I believe we're talking specifically about Nigeria? I've seen [indiscernible] that mobile network companies want to increase tariffs in Nigeria. And I've seen the response from the regulator. This regulatory decision, I don't think any network operator can increase price without the leave of regulators. So I'm unable to comment on this unless you have the final view of the regulator. To be very specific [indiscernible] countries where we operate in.

The next question is from Alastair Jones of Renaissance Capital.

Just come back to the CapEx question again. Apologies for that. And apologies if I didn't hear it clearly first time around. Just the guidance of the $750 million this year. I know your guidance historically, in the medium term has been 650 to 700. So once the PSB rollout has been done, which is largely -- has largely driven that exceptional cost, it's your sort of medium-term outlook guidance ticking at similar rates at 650 to 700? Or is that something you will address at a later stage? That's the first question. And then just secondly, on the mobile money in Nigeria. Obviously, you talked a lot in the presentation around exclusivity and the importance and insurance of floats and availability of floating cash, et cetera. How does that work in Nigerian context where my understanding it is not an exclusive distribution franchise? So how do you sort of navigate around those issues in the Nigerian market as you rollout PSP?

Let me take the question for. If you look at the number of elders without bank accounts in Nigeria, it is certainly around 50% more than half of Nigerians don't have bank accounts. So we have I mean 2 spaces that we're looking at. One space is a space where you're not in the financial system. So you don't have a bank account, you don't have your wallet. So that particular space is where we're going to use our distribution reach to fill, making sure people wouldn't have anything, we'll keep their money, they're in the hours on that if they go somewhere, we're going to have them open a wallet where they can safely store value in any of our 30,000 [indiscernible] we've created. That's a unique proposition, and we have the unique way of reaching those many customers who are not part of the financial system. So that is one piece. The second piece is where particularly more competition is in the area where we are starting most of these credit customers, who will have bank accounts, but we're also going to target with mobile money applications. Those are slightly more sophisticated and maybe slightly more competition with open industries, but we're going to offer a reach out proposition, a lot more financial approvals, that is way beyond the traditional use of mobile wallet beyond the mobile business, we're going to look at stuff like being intermediary for insurance, intermediary for loans, intermediary for investment. That is additional value where we're going to complete it. And remember, we've got about 40 million customers in there as we speak. I don't think any of the margin [indiscernible] customer base. These are customers who are using us for data activity classes internet, they are using us for making phone calls. They're already captive on our system that wants to go to offer these 2 unique opportunities for the very low opportunities to have a mobile wallet use SMS, use the SLT, but a slightly more sophisticated customers opportunities to build the app that we've already created, processed financial approvals and at wide band that we're looking at. In terms of the CapEx guidance, I think it will come back again. But I mean we're very clear that in the short-term, we're adding a small amount for our investment in Nigeria with PSB around $30 million, $40-odd million we've seen. The normal range is around 660 and 700. Well, Jaideep, do you want to give more flavor to this?

Yes. I would say in medium term, we'll continue to be in the range of 700 -- between $700 million, $725 million, $730 million. One of the reasons for that, why we are slightly increasing it because as we are expanding our network, our -- within our footprint, increasing the coverage area and also increasing the 4G penetration across the footprint, as you've seen that today, we have almost reached 88%, but there's still some way to go. So with all these things -- and with the increase in data usage, that gives us the courage of maybe improved increase in the CapEx from earlier guidance of $600, $650 million to probably around $700-odd million -- between $700 million, $725 million. And that, I think, should be broadly okay in the medium term.

The next question is from Farouk Miah of All Africa Partners. It would appear we have some technical difficulties on that line as well. So we don't have questions from the queue at the moment. Would you like to proceed with questions from the webcast?

Yes. Thank you. Thank you, Chris. There are quite a few questions on the webcast. So we take just a few of them, but we will get back to each individual questions separately from the IR team. The first question, Segun, is on Q4, Q3 trends. And any insights on the trends that you've seen, particularly in terms of growth between Q3 and Q4?

If you look at Q4, Q3, 2 key indices we account for the slowdown in Q4. One is, of course, the lower number of days. In Q4, we have 90 days. In Q3, we have 92 days. So that's a 2.2% differential coming from a number of days in Q4. The bigger one is on the sale of towers in Tanzania. We lost the revenue from towers, I mean [indiscernible] top party has a significant amount, $6 million. So if you normalize for those to impact, the impact of 2 less days in Q4 and impact of the [indiscernible] revenue that we lost from Tanzania is more or less the normal to expect for Q4 versus Q3.

Any comment on the inflationary environment that you see across Africa and in Nigeria in particular? And the next one is also on Tanzania mobile money, whether you can comment on whether the business is returning to growth or not?

On Tanzania mobile money, we expect another quarter, this first quarter will still be very challenging for us. And after this first quarter, you're going to start cycling the levels affected the quarters of last year. We continue to also work with the government, continue to work with it bureaus, agencies in Tanzania, showing them that is probably the best interests of the economy, best interests of customers who have low level of targets so that can stimulate financial inflation. We are engaging with the government on this. Hopefully, we will reach with spots. That will be good for the economy and good for the customers moving away from digital transaction path to the traditional cash economy. So hopefully, we would get to [indiscernible] with the government. In terms of inflation, yes, fuel inflation, food inflation is upsetting the wallets of customers. And we're not immune I mean from these in part as well. What we continue to do is to find ways of mitigating the medium part. But finally, if you look at in the first few months of the year, we had COVID which affected most of our customers, which could -- who couldn't go out for daily activities. Most of our countries are open now. So as we look at the impact of inflation, we should look at the [indiscernible] economies in Africa, they open up now, for those who also get paid on a daily basis, they are back to work and also increased -- we also expect some increase in cash [indiscernible]. So it's a mixed bag of fruits. One, of course, inflation affecting the wallet coming from fuel and food, and certainly a lot more people are good to keep their wallet because they are back to work now from the COVID lockdown for the last few quarters.

And next one is more on Nigeria. To comment on these tariff increases and whether the wallet in [indiscernible] to approve. So what is the process in terms of price increases? And the strong growth voice that we are experience in Nigeria, is that sustainable?

Let me take the growth faster because if you look at the ARPU that we derive from Nigeria, voice ARPU grew -- data ARPU grew. It's still a county that we have many on top opportunities. We've still not covered the country in terms of opposition. And as we continue to expand the 4G full, lot more of the data revenue, as I speak now most of the towers in Nigeria were covered by 4G to expect some acceleration in the tariff that need to come from this. Beyond this, we spending our coverage a lot more of the rural communities where it was in the very financially by 2 years ago. We're now achieving a different view. We are starting corporate to those areas. So not expect a lot more of voice revenue, a lot more of data revenue. As we now launch mobile money, we're going to have [indiscernible] in a year will continue to be a very important part of portfolio. In terms of price increase, like I said earlier, we don't know the pricing power. Pricing is determined by the regulator. Of course, telcos are able to make recommendations to the regulator, but ultimately the regulator will decide whether to say yes or no. So I leave that to the regulators, you'll have to do what is best for the country.

And the last one, how do you see your regulatory tax environment across your main markets?

There are different levels of maturity, and we continue to comply with all the rules and regulations in each of the 14 countries where we operate. We don't make the rules. We just have to comply with the rules. If you reckon that, and there is a lot of improvements to be made. We engage with regulators, we engage with governments. I've been to number of countries talking to ministers, talking to regulators. Just finding a sweet spot that would benefit the economy, benefit the operators. And being the greater interest of the customer that's what we all after. So yes, we comply with rules. If the rule that we reckon is not customer-friendly, is not operator-friendly we engage regulators and they find ways of making them more friendly in the bigger interest of our stakeholders.

Thank you. Thank you all then for joining the call, and we look forward to seeing you, as many of you as possible in the next few days. And operator, you can now close the call. Thank you.

Thank you.

Thank you very much. Ladies and gentlemen, that then concludes this event, and you may disconnect.