13 May 2021
4QFY21 Results Update | Sector: Telecom
Airtel Africa
BSE SENSEX
48,691
S&P CNX
14,697
Strong performance in Nigeria; growth in Data revenue
remains robust across geographies
Operating profit remains flat; lower finance/tax charges boost PAT
growth:
Airtel Africa’s revenue/EBITDA fell 2% each QoQ to
USD1,038m/USD492m in 4QFY21, with a 20bp decline in margin to 47.4%.
On a constant currency (CC) basis, revenue/EBITDA rose 2%/4% QoQ to
USD1,058m/USD506m (in line). EBITDA margin improved 90bp QoQ to
47.8%. Performance remained flattish QoQ as ARPU increased by 1% to
USD3, while net subscriber base declined
by
0.6% to 118.1m. Reported PAT
rose 69% QoQ to USD154m
due to lower (down 19%/27% QoQ) finance/tax
charges, leading to
PAT benefits. Monthly churn fell to 3.9%, which is the
lowest in the past four years (v/s 5% in 3QFY21). Net debt/EBITDA for FY21
stood at 2x (v/s 2.1x in FY20). FCF rose 42.8% YoY to USD647m in FY21.
Nigeria drove growth, but was offset by East/Francophone Africa:
Geography-wise, Nigeria revenue/EBITDA grew 7%/9% QoQ (in CC terms) to
USD441m/USD242m. This was mainly led by a 6%/16% improvement in
Voice/Data ARPU, while its subscriber base declined by 6%. East Africa’s
performance remained flat QoQ, with revenue/EBITDA at
USD373m/USD171m (in CC terms) due to a 5% QoQ decline in revenue from
the Voice segment (as ARPU fell 4% QoQ, while its subscriber base stood flat
QoQ), offset by 7% growth in Data revenue. In CC terms, Francophone
Africa’s revenue/EBITDA grew 0.4%/1% QoQ to USD250m/USD105m as the
6% growth in subscriber base was offset by a 5% decline in ARPU. Voice
revenue declined 2% QoQ, while Data revenue grew by 8%.
Data revenue shows the highest growth:
Across segments, Data revenue
showed the highest (9% QoQ) growth at USD322m (in CC terms) on the back
of strong ARPU growth (+13% to USD2.7), while its Data subscriber base
stood flat at 41m. Revenue for the Voice segment fell 2% QoQ to USD557m,
driven by a 1% decline in subscriber growth to 118m, while ARPU was flat at
USD1.6. Revenue for Mobile Money segment remained flat QoQ as ARPU
declined 5% QoQ to USD1.7, offset by marginal growth in its subscriber base
to 22m.
Highlights from the management commentary:
a)
Growth engines:
Data
and mobile money remain the growth engines, with annual growth in excess
of 30%. The cost of traditional banking remains high in Africa, providing an
opportunity for Airtel Mobile Money. b)
Francophone:
The region is turning
a key growth contributor in Africa. Data services grew 32% in FY21 led by
expansion of 4G networks (65% sties on 4G network). Mobile Money grew
48% YoY, with strong growth in the DRC region. c)
Capex and deleveraging:
Capex target stands at USD650-700m annually and will be utilized mostly
towards modernization of its network, growth of cell sites and fiber
footprint for towers, and increase in 4G coverage. FCF has been strong at
USD647m. Leverage reduced to 2x in FY21 from 9x in FY17. d)
Growth
opportunities:
Voice ARPU can grow further as customer voice service
utilization still remains low (v/s global average).
Aliasgar Shakir - Research Analyst
(Aliasgar.Shakir@motilaloswal.com);
Research Analyst: Suhel Shaikh
(Suhel.Ahmad@MotilalOswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.