The contribution of Airtel Africa Limited to Nigeria’s economy cannot be overemphasized, even as it operates in a harsh business landscape. The telecommunications giant has been surmounting the tempest, as it stayed afloat during a severe dollar scarcity that tipped the country in its first recession in 25 years.
The company just released its financial statement for the first quarter ended 30 June, 2019 that showed marked improvement in key performance ratios, delivering a higher returns for shareholders on form of share appreciation.
With a strong working capital position, solid asset base, and robust cash flows, the company is a position to leverage on the country’s rising population to increase market share.
It has continued to invest in its 4G network, adding early 1,500 sites; now more than half of its sites are 4G. The telecommunication giant is about to launch its Mobile Money business in Nigeria, securing approval of the brand name, an important step as it awaits approval for its payment service bank license.
Airtel has a market capitalization of N1.26 trillion as at August 7, 2019, making it the third largest company by market value.
Financial Performance of Airtel Africa
For the first quarter ended June 2019 (Q1-2020), Airtel Africa’s revenue increased to $795.90 million from $744.50 million the previous year, with constant currency growth of 10.20 percent. This was the 6th consecutive quarter of double-digit constant currency growth.
Revenue growth of 10.2 percent in constant currency was driven by double-digit growth in Nigeria and East Africa, partially offset by a decline in revenue in Rest of Africa
The company recorded growth across business products as it continues to stamp its across Africa.
Voice revenue, the company’s largest business product, was up 3 percent, largely driven by 9 percent growth in its customer base, as customer base nears 100 million.
Data revenue, the largest contributor to growth, was up 36 percent as an increasing number of customers relied on the the company’s high-quality and high-speed LTE network.
As a result of the aforementioned high-quality and high- speed usage, data usage was up 79 percent. Mobile Money revenue, the company’s fastest growing business, increased by 42 percent as it expanded it distribution reaches.
Airtel Africa has spent less in producing each unit of products as total expense ratio fell to 56.78 percent in Q1-2020 from Q1 2019, while operating expenses increased by a mere 3.20 percent to $452.30 million in the period under review from $438.40 million the previous year.
A breakdown of expenses shows depreciation and amortization increased by 15.40 percent to $148.40 million in the period under review as against $128.20 million the previous year.
The company’s operating earnings can cover interest expense, which means it is not exposed to financial risk. Its interest coverage ratio is 2.29 times earnings, which is higher than the 1.50 times international benchmark.
However, finance costs moved to $81.5 million in Q1-2020, largely as a result of lapping one-off benefits incurred in the prior year and foreign exchange impact on debt, which more than offset some derivative gains and a 20 percent decrease in interest costs as a result of lower debt.
Total debt increased by 1 percent to $4.88 billion in the period under review as against $4.83 billion in Q1-2020.
Airtel Africa’s earnings before interest taxation depreciation and Amortization (EBITDA) were up 9.70 percent to $347.60 million in the period under review from $316.90 billion the previous year. The growth in EBIDTA was largely driven by currency growth.
Underlying EBITDA margin was at 43.7 percent, an improvement of 101 bps as operating efficiencies in network expense and other overheads, more than offset inflation costs and the one-off impact from the quality of service charge in Gabon.
Airtel Africa’s profit before tax surged by 108.80 percent to $167.40 million in the period under review as against $80.20 million; thanks to cost curtailment and exceptional items.
The company has been contributing to the country’s economy since it was entered into the market in early 2000, and the telecommunication has become a pivotal the economic growth.
The Information and Communication accounted for 63 percent of growth in second (Q2-2019) quarter gross Domestic Product (GDP).
Strong growth in Nigeria operation
Airtal Nigeria Limited, a subsidiary of Airtel Africa Limited, recorded a 22.13 percent increase 22.12 in revenue to $312.90 million in Q1 2020, from $256.20 million as at Q1 2019.
The growth in revenue was largely driven by stable foreign exchange environment. Access to foreign currency has improved following the introduction of the Investors’ and Exporters’ window in 2017.
A breakdown of revenue shows Voice data increased by 12.7 percent, mainly driven by double digit increase in customer growth, as it continued to leverage its efficient distribution system and leading 4G network to acquire new customers.
Data revenue, the largest contributor to revenue growth, was up 73.1 percent while Data growth was driven by a 21 percent increase in customer base and growth in ARPU.
Data growth was also driven by increased penetration of 4G data customers as the business benefited from the roll out of the 4G network.
Data revenue in the quarter ended 30 June 2019 accounts for 30 percent of the Nigeria revenue, compared to 21 percent in the prior year.
Airtel Nigeria’s cost control strategy has yielded fruit as margins improved, as it recorded double growth in operating profit.
Earnings Before interest, Taxation, Depreciation, and Amortization (EBITDA) spiked by 41.90 percent to $116.70 million in Q1 2020 from $117.50 million the previous year.
Earnings Before Interest and taxation (EBIT) was up $120.90 million in the period under review from $63.10 million the previous year.
EBITDA margin in constant currency moved to 53.30 percent in the period under review as against 45.90 percent the previous year. Margin expansions is as a result of revenue growth and operating efficiencies in the network expenses and other overheads.
The company company’s capital expenditure surged by 285.16 percent to $53.20 million, as the business continued to expand and invest in the 4Gnetwork, with the number of 4G sites increased fivefold, representing 60 percent of total sites.
With a free cash flow of $113.50 million, Airtel Nigeria has the financial strength to pay dividend, settle its debt, and fund future expansion plans.
The growth potential of Airtel’s business is huge considering mobile penetration rate of 86 percent as at the first quarter of (Q1’2019) 2019, which could help in driving voice (accounting for 74.9 percent of revenue as of Q1 2019) and data revenue (accounting for 16.6 percent of revenue as of Q1 2019).
Nigeria’s population demographics evident in its youthful population also serve as an opportunity for growth in data revenue given the growing usage and acceptability of social media and internet surfing for communication.
A rebound in consumer spending, which is also a boost for data bundle consumption, will help underpin Airtel’s earnings earnings.
The growth potential of MTN’s business is huge considering mobile penetration rate of 86 percent as at the first quarter of 2019 (as at Q1’2019) which could help in driving voice (accounting for 74.9 percent of revenue as of Q1 2019) and data revenue (accounting for 16.6 percent of revenue as of Q1 2019).
Nigeria’s population demographics evident in its youthful population also serve as an opportunity for growth in data revenue given the growing usage and acceptability of social media and internet surfing for communication.
A rebound in consumer spending, which is also a boost for data bundle consumption, will help underpin Airtel Nigeria’s earnings.
BALA AUGIE
Join BusinessDay whatsapp Channel, to stay up to date
Open In Whatsapp
