Airtel Africa reports all-round double-digit revenue growth in 4Q22

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May 12, 2022/FSDH Research

Key Performance Highlights:

  • Airtel Africa announced impressive results on 11 May, with the revenue rising 20.6% YoY to US$4,714 million in FY22, on a reported basis. The all-around growth was driven mainly by an 8.6% YoY growth in the customer base to 128.4 million and a robust ARPU growth of 14.3% YoY (in constant currency terms). Looking at segmental revenue growth, voice revenue grew 13.2% (+15.4% in constant currency), data revenue was up 31.8% (+34.6% in constant currency), and mobile money services revenue grew by 37.9% (+34.9% in constant currency). The revenue growth was evenly distributed geographically, with Nigeria’s revenues growing 21.0% YoY, while East Africa recorded 24.3% revenue growth and Francophone Africa recorded 14.8% revenue growth in constant currency.
  • The network operating expenses spiked 17.7% YoY to $817 million, while access charges climbed 8.2% YoY to $407 million in FY22. Employee benefits expenses and Sales & Marketing expenses surged by 8.0% and 19.8%, respectively, owing to the inflationary environment in the economy. Other expenses also vaulted 18.1% from US$382 million to US$451 million in FY22.
  • The company’s operating profit surged 37.2% YoY (39.4% in constant currency terms) to US$1.5 billion in FY22 as a result of solid revenue growth and controlled operating expenditures in proportion to revenue. Net finance costs declined by 4.6% YoY to US$403 million, and the company recorded a non-operating income of US$111 million in FY22. Consequently, profit after tax shot up 81.9% YoY to US$755 million. The company’s earnings per share soared 86.3% YoY to 16.8 cents, from 9.0 cents in the prior year. This increase was mainly due to higher operating profits, which offset increased tax charges and higher non-controlling interests.
  • The company recorded a 29.0% growth in underlying EBITDA in reported currency (+31.2% in constant currency terms) to US$2.3 billion in FY22, driven by revenue growth and supported by improved operating efficiencies, which were partially offset by adverse foreign exchange movements. The underlying EBITDA margin was 49.0% in FY22, 294 bps expansion YoY in reported currency (296 basis points in constant currency). Leverage also improved to 1.3x from 2.0x in the prior year, primarily driven by increased cash generation, expansion of underlying EBITDA and proceeds from Airtel Money investments. Net cash generated from operating activities jumped 20.7% YoY to US$2.0 billion. Looking at the key operating metrics, the Customer base grew by 8.6% YoY to 128.4 million, with increased penetration across mobile data (customer base up 15.2%) and mobile money services (customer base up 20.7%). The slowdown in customer base growth was due to new SIM registration regulations in Nigeria. Nonetheless, Airtel Africa successfully added 2.6 million customers, excluding Nigeria the customer base grew by 10.2% in 4Q22. Airtel Africa recorded an ARPU growth of 9.5% YoY in reported currency (+10.7% in constant currency) to $3.2 in 4Q22. However, ARPU was down 1.5% sequentially in 4Q22 due to reductions in international call revenue and local incoming call revenue (the latter due to changes in local interconnect rates in Gabon, Niger, and the Republic of the Congo).                         
  • The board recommended a final dividend of 3 cents per share, making a total FY22 dividend of 5 cents per share, including the interim dividend of 2 cents per share, and in line with the upgraded dividend policy (FY21: 4 cents).
    Other key updates:
  1. On 29 April 2022, Airtel Africa’s subsidiary SMARTCASH Payment Service Bank Limited was granted final approval to operate a payment service bank (‘PSB’) business in Nigeria. The PSB licence is required for Airtel to provide financial services in Nigeria, such as accepting cash deposits and carrying out payments and remittances, issuing debit and prepaid cards, operating electronic wallets, and rendering other financial services.
  2. On 26 April 2022, Airtel Africa’s subsidiary Airtel Mobile Commerce Nigeria Ltd was approved for a full super-agent licence by the Central Bank of Nigeria. The super-agent licence is distinct from the PSB licence; under the super-agent licence, Airtel Africa can create an agent network that can service the customers of licensed Nigerian banks, payment service banks, and licensed mobile money operators in Nigeria.
  3. On 8 March 2022, Airtel Africa announced the repayment of $505 million, 5.125% Guaranteed Senior Notes, originally due in March 2023, using cash balances available at the Group level. The settlement included all outstanding accrued interest up to the redemption date of 7 March 2022.
  4. On 4 April 2022, the Nigerian Communications Commission (NCC) announced its decision not to extend the deadline for NINSIM linkage further, requiring all operators to restrict outgoing calls for subscribers whose SIMs were not associated with National Identity Numbers (NINs). As of 5 April 2022, outgoing voice revenues for those active subscribers who have not yet linked their NIN with their SIM amount to around 8% of total revenues from Nigeria and about 3% of total revenues for the Group.

Market Reaction: Investor reaction to the overall strong 4Q22 results (except sequential ARPU) was restrained as the stock closed unchanged at N1400, versus a 1.99% gain for the All-Share Index (11/5). Nonetheless, given the tailwinds in the telecom business and the improving business fundamentals, the Airtel Africa stock has appreciated about 10.1% over the last three months.

Airtel Africa Earnings Highlight FY22

Source: Company Financials, FSDH

Note – 1 Revenue includes intra-segment eliminations of $129m for the year ended 31 March 2022 and $100m for the prior year. And it also excludes one-time exceptional revenue of $20m relating to a settlement in Niger in the year ended 31 March 2021
2 Mobile money revenue post intra-segment eliminations with mobile services was $424m for the year ended 31 March 2022, and $301m for the prior year
Other revenue includes messaging, value-added services, enterprise, site sharing and handset sale revenue.

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