Airtel Africa FY '23: 5G, Mobile Money and More
4 Customs Street: 15 May 2023
Welcome to this week’s edition of 4 Customs Street, our weekly newsletter on the stock market.
The newsletter is divided into two:
Green White Green—focused on the Nigerian stock market.
Star-Spangled Banner—focused on the US stock market.
Green White Green Last Week
There was lots of news from the telco space.
Airtel Nigeria made a payment of N58.7 billion to the Nigerian Communications Commission (NCC) to renew its 2x10 MHz 2100 MHz spectrum licence. The licence will be valid for a period of 15 years.
MTN Nigeria got approval from the Nigerian Communications Commission (NCC) to lease Ntel's 5MHz frequency in the 900 MHz spectrum band and 10 MHz in the 1800 MHz spectrum band covering 19 states. The spectra are for 3G and 4G capacity. The transaction is for 2 years effective May 1, 2023 at a cost of N4.25 billion.
MTN also renewed its 2100MHz spectrum for 15 years effective from May 1, 2022 to April 30, 2037 at a cost of N58.6 billion. This licence covers 3G mobile services.
Airtel Africa FY 2023
Airtel Africa released its results for the financial year ended March 2023.
Revenue rose by 11.5% from $4.7 billion in 2022 to $5.2 billion in 2023.
Operating profit went up by 14.5% from $1.5 billion in 2022 to $1.7 billion in 2023.
Profit before tax fell by 15.5% from $1.2 billion in 2022 to $1 billion in 2023. The decline was due to a jump in finance costs.
Profit after tax slipped by 0.6% from $755 million in 2022 to $750 million in 2023.
The company's board has recommended a final dividend of 3.27 cents per share. Qualification date for the dividend is June 23.
Payment rate is July 26.
Before going into Nigerian numbers, the following lines from its earnings release are quite interesting.
"With respect to currency devaluation sensitivity, on a 12-month basis, a 1% currency devaluation across all currencies in our operating companies would have a negative impact of $51m on revenues, $31m on underlying EBITDA and $23m on finance costs. A 1% devaluation of the Naira would have a negative impact of $22m on revenues, $12m on EBITDA, and $7m on finance costs (excluding derivatives)."
EBITDA means earnings before interest tax depreciation and amortisation.
The EBITDA margin shows you how much operating cash is generated for each dollar of revenue earned.
Airtel Nigeria FY 2023
Now to the Nigerian numbers.
Revenue rose by 20.3% from $1.8 billion in 2022 to $2.1 billion in 2023.
Voice revenue was $1 billion and data revenue $884 million. FY 2024 will definitely be the year data revenue overtakes voice.
Operating profit dipped by 6.6% from $770 million in 2022 to $719 million in 2023.
Total customer base rose by 9% from 44.4 million in 2022 to 48.4 million in 2023.
Data customer base rose by 17.3% from 20.3 million in 2022 to 23.8 million in 2023.
Mobile services average revenue per user was $3.8
The cash crunch and NIN barring had a fairly significant impact on operations in Nigeria.
Q4 2023 revenue growth at 18.7% was lower compared to 23.1% in Q3 2023 mainly due to the cash crunch, which impacted cash recharges. 50% of total recharges are cash-based. When last did you load a physical card?
The barring of outgoing calls for customers who had not submitted their NINs had an adverse impact on voice revenue.
13.6 million customers were originally barred.
6.4 million customers (47%) have subsequently submitted their NINs.
3.5 million customers(26%) have been fully verified and unbarred.
This resulted in the loss of approximately $110m of revenues in the year ended March 31, 2023, providing a drag on revenue growth of 6% in Nigeria.
Data usage per customer reached 5 GB per customer per month from 4 GB per customer per month in the previous period.
In Q4 2023, 4 GB data usage per customer increased to 9.5 GB per month (up by 46.5%) from 6.5 GB per customer per month in the prior period. 4G data usage now contributes to 80.4% of total data usage.
Following the release of the results, Airtel Africa held an earnings call. Management discussed a range of topics: 5G expansion, mobile money operations in Nigeria and a broad overview.
The standalone piece on the call will be on substack. Here are a few excerpts.
On 5G services
“In the short term, we will focus on how we can use 5G to deliver broadband to homes and small biz. Select numbers and key cities. Lagos. Gambia. DRC. Uganda. Also influential neighbours where we recorded sufficient purchasing power and there are enough devices and they can afford to pay for 5G devices. Use case for 5G devices is still limited given low penetration and the relatively high prices of devices. As soon as it becomes cheaper, we expect deeper penetration and a lot more consumer use cases will follow."
Mobile money operations in Nigeria
“We are prioritizing customer acquisition ahead of revenue growth. 600k active customers. Opened over 12 million wallets. Registered about 125k agents as of the end of March. 52k active. Q4 transaction value is 500 million USD. Once we get to a certain level of customer base, we will look at the money.”
Managing higher energy costs
"Our dependence on generators is highest in Nigeria due to shortage of grid power availability. Actively working with the towercos (tower companies) to see how we can convert some of these sites to solar and higher capacity batteries to reduce this impact in the future."
To the financial services space.
Union Bank’s board of directors have received an offer for the acquisition of all the shares held by the minority shareholders. The shares will be acquired by Titan Trust at N7 per share. Union Bank has received the ‘No Objection’ of both the Central Bank of Nigeria and Securities & Exchange Commission.
Abbey Mortgage Bank will be seeking shareholder approval to convert the bank's primary mortgage bank licence to a regional commercial bank and raise N10 billion in capital that would be needed at the 31st Annual General Meeting which will be held virtually via https://www.abbeymortgagebank.com/2022agm on Wednesday, May 31, 2023 at 11:00 a.m.
Green White Green This Week
Regency Alliance Insurance will hold a special board meeting on Thursday, May 18, 2023. The agenda is to review the operational strategies of the firm and consider issues relating to the future structure of the firm.
Nestle Nigeria, ETI, Capital Hotel, NEM Insurance, Neimeth International, Notore Chemical, UPDC, and Golden Guinea Breweries will have their Annual General Meetings (AGMs) this week.
For many shareholders, their priority is the dividends which get paid on the day of the AGM or after. So if you are a shareholder, watch out for that.
Star-Spangled Banner Last Week
AI showdown: Google unleashes next-level updates to outshine Microsoft!
After Microsoft included GPT-4 in Bing, Google revealed the introduction of generative AI into their search engine. Responses to open-ended searches are generated via the new feature known as Search Generative Experience.
It's currently in the experimental stage and only available to a specific group of users. This demonstrates Google's dedication to improving search experiences and developing AI-powered search technologies.
Biden reveals Federal Reserve nominees, shaping financial future.
President Biden said on May 12 that he intended to propose Jefferson, a current Federal Reserve (Fed) governor, to succeed Lael Brainard, who resigned from the position in February, as the next vice chair of the central bank. Adriana Kugler, a former chief economist at the US Department of Labor, was also chosen by the President to fill one of the open positions on the Fed Board of Governors.
He also intends to put Lisa Cook, another Fed governor, up for reelection for a full-term. These nominations will now be sent to Congress, where a Senate confirmation vote is necessary before the individuals may start working for the Federal Reserve.
If approved by the Senate, Kugler would hold a 14-year term that is anticipated to finish around 2037. Jefferson would hold the Fed vice chair position throughout his current term as governor until 2036. Unless Cook is confirmed by the Senate, her present tenure will end in 2024.
Bitcoin dips below $26,500
The market value of Bitcoin, the biggest cryptocurrency, has significantly decreased and is now below the $26,500 barrier. There are rumours that the US government is considering selling a significant amount of Bitcoin from its holdings, which might lead to a glut of supply on the market and further lower prices.
On March 14, reports surfaced claiming that the US government had sold 9,861 Bitcoin, worth around $215 million, that had been seized from those engaged in illegal activities on the Silk Road platform. Plans to sell an additional 41,490 BTC linked to Silk Road in four consecutive batches throughout the current year were revealed in court documents filed in April. Law enforcement authorities confiscated Silk Road, an online marketplace that supported illegal activity, previously in 2013.
Twitter gets a Musk makeover
Musk tweeted: "Excited to announce that I've hired a new CEO for X/Twitter. She will be starting in ~6 weeks!"
Elon Musk has announced his plans to assume the position of Chief Technology Officer (CTO) at the social media platform Twitter in the coming weeks.
Additionally, Musk has handpicked Linda Yaccarino, a prominent figure from NBC Universal (NBCU), as the next CEO of Twitter.
US exposes fake billionaire's Ponzi scam!
According to a statement from New Jersey US Attorney Philip Sellinger, Phillip Galles, 57, was charged with one count of wire fraud in a criminal complaint made public on Thursday. Galles is accused of stealing more than $2 million from victims whose money he allegedly claimed that he was investing in commodity futures.
Authorities claim that Galles made essentially no investments whatsoever. Instead, the prosecution claims that he was operating his business like a Ponzi scheme and using the funds for his personal needs and the repayment of early investors.
Bank of England drops the mic on recession
The Bank of England decided to raise interest rates by 25 basis points and revised its economic projections, eliminating the possibility of a recession in the UK this year.
The updated growth forecasts in the accompanying Monetary Policy Report indicate that the Monetary Policy Committee (MPC) no longer anticipates the UK economy to enter a recession in the current year.
The revised projections now expect the UK GDP to remain unchanged in the first half of this year, with growth predicted at 0.9% by mid-2024 and 0.7% by mid-2025.
Disney's streaming adventure: fewer subscribers, but hey, losses are improving
Disney's dropped Q2 numbers came in right in line.
Here are the results:
EPS: 93 cents per share
Revenue: $21.82 billion
Disney+ total subscriptions: 157.8 million
The number of subscribers dropped by 2%, from 161.8 million on December 31 to 157.8 million. Most of these losses were caused by an 8% decrease in Disney+ Hotstar subscribers in India.
However, Disney's streaming losses decreased during the second quarter of its fiscal year as pricing increases helped to offset a decline in Disney+ customers.
The company plans to offer a single app that combines Hulu content into Disney Plus by the end of the year. CEO Bob Iger disclosed this during the earnings call held this week. Disney Plus, Hulu and ESPN Plus will remain standalone streaming services.
Inflation takes a chill pill: US rates ease to 4.9%
As housing, used cars, and petrol costs increased last month, the consumer price index increased by 0.4%.
However, that translated into a 4.9% yearly gain.
The Consumer Price Index (CPI) measures the average change over time in the prices paid by urban consumers for a basket of goods and services. It is often used as a measure of inflation and is calculated by the Bureau of Labor Statistics in the United States.
Google’s $1,799 folding phone
During I/O 2023, Google unveiled the $1,799 Pixel Fold—the company's first foldable phone.
Google I/O is an annual developer conference hosted by Google, showcasing its latest technologies and products. Preorders of the phone are now open, and shipping starts next month.
With small camera lenses and what appears to be a twin battery system, Google claims that their foldable phone is the thinnest on the market. When opened flat, it will boast a 7.6-inch display.
247 go
Robinhood announced plans for 247 trading, making it the first US retail brokerage to do so. It will, however, start with a list of 40 well-known stocks and ETFs.
Star-Spangled Banner This Week
With reports from major retailers like Target, Walmart, Alibaba and Home Depot, this week may be the last significant week of the current earnings season.
Starting on Friday, the Group of Seven (G7) summit of 2023 will take place in Hiroshima, Japan.
The Group of Seven, also known as G7, is an intergovernmental organisation composed of seven of the world's largest advanced economies. Its members include Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States.
Also, On Tuesday, the US Census Bureau will release a report on April retail sales, giving an essential update on consumer spending.
Additionally, we can anticipate GDP estimates from the eurozone and Japan, as well as an inflation estimate from Canada.
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